Foodee, a Vancouver-based corporate catering tech startup, has closed $13 million CAD in funding and revealed its acquisition of San Francisco-based competitor, Chewse, which closed in March.
“Our [revenue] went from 100 percent in week one [of the pandemic], to 75 percent in week two, to zero,”
The funding, which closed in June, consisted of equity and debt financing. The equity portion was led by BDC Capital through its bridge financing program. Existing investors Structure Capital and Kensington Capital also participated, and as well as a new investor, Foundry Group. Foodee declined to disclose the amount of debt versus equity.
Although the company’s last round of financing was a $10 million Series A round in 2017, Foodee CEO Ryan Spong told BetaKit the latest financing is not being classified as a Series B round, rather it is strategic financing.
A portion of the new financing was used to fund Foodee’s acquisition of Chewse. Spong said the funding is also being put toward developing in the new markets the company acquired through the Chewse deal. A portion will also go towards fueling Foodee’s day-to-day operations, after the business was hit hard by the COVID-19 pandemic.
Foodee partners with local owner-operated restaurants in cities across North America as well as delivery services to bring daily and weekly meals to offices.
The terms of Foodee’s acquisition of Chewse, including purchase price, have not been disclosed. Barb Anderson, COO of Foodee, told BetaKit a portion of the $13 million was raised prior to the final close of the financing in June in order to fund the acquisition, and additional capital was raised after the acquisition deal closed.
Anderson said Foundry Group, who was Chewse’s largest investor, made an equity investment in Foodee, which helped supply some needed capital for its acquisition of Chewse. The COO added that Foundry Group and Foodee first connected through the Chewse acquisition deal.
Foodee was founded in 2010, and according to Spong, reached product-market fit in 2013. Since then, Foodee has served close to one million individual meals. The CEO told BetaKit Foodee achieved profitability in the second quarter of 2019.
“Part of it is going to be weathering the storm, [as COVID-19] put us fairly squarely in the crosshairs.”
“Part of it is going to be weathering the storm, [as COVID-19] put us fairly squarely in the crosshairs,” Spong said in regards to the $13 million. “There’s lots of work to be done on our product and internal projects for the company, but as we see the business come back over the next six to nine months, part of [the] capital is there for us to really start investing and developing these new markets.”
In March, the pandemic forced Foodee to close its offices. The startup relies on partnerships with local restaurants, and its customers are usually office managers. Both markets effectively disappeared once the lockdowns across Canada and the United States took effect.
“Our [revenue] went from 100 percent in week one [of the pandemic], to 75 percent in week two, to zero,” Spong told BetaKit. “It was a two-week period where things just completely shut off pretty much across the board.”
Robert Simon, senior managing partner of BDC Capital’s IT Venture Fund, noted that Foodee was “growing aggressively until the COVID-19 forced offices to close.”
Within 24 hours of closing the Chewse acquisition, Foodee’s entire 52-person team was furloughed. The company later began to recall employees after it was approved for the federal government’s 75 percent wage subsidy program and closed the $13 million round of financing.
As of July 10, Foodee has recalled all but five team members, as restaurants began to open back up in several of Foodee’s markets. With the new funding, Spong said Foodee will be able to focus on product development and grow in the new US cities it has entered following the Chewse acquisition. Following the purchase of Chewse, Foodee added Chicago, San Francisco, and Denver to the cities it operates in, bringing the total number to 14.
“As the economy re-opens across North America, the company’s model is particularly well-suited in a social distancing environment by delivering individually packaged meals, reducing elevator traffic, and increasing employee safety,” said BDC Capital’s Simon.
“As clients all over North America discuss their return to work plans with us, they are quickly making the switch from platters of shared food to smartly packaged meals,” Spong added. “Modern offices in the Bay Area adapting to a hybrid work model have been exceptionally receptive to our meal planning platform and the switch to individually packaged meals.”
The Foodee CEO added that he expects the first wave of employees returning to work will begin in September and anticipates Foodee’s business to return to pre-pandemic levels by April 2021.
Image source Foodee.