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Cloud kitchen startup Box8 to enter more cities after Series C funding

Cloud kitchen startup Box8 to enter more cities after Series C funding
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Poncho Hospitality Pvt. Ltd, which provides on-demand food delivery services under the Box8 brand, will explore expansion into India's top cities by replicating the cloud kitchen business after raising its Series C funding round, its founder said.

Amit Raj told TechCircle that the Mumbai-based company's biggest markets are its home city and Bengaluru, though it is also seeing “great traction” in Delhi-NCR.

“We now plan to expand to other top cities like Hyderabad, Chennai and Ahmedabad and would go deeper into these markets, besides investing heavily in technology,” he said.

Nikhil Bansal, head of expansion at Box8, said the company plans to enter five cities with 100 more kitchens in the next 12 months. 

The company recently raised $15 million (about Rs 100 crore)) in a Series C round led by Alibaba Group-backed technology vehicle eWTP Ecosystem Fund with participation from existing investors Mayfield and IIFL Seed Ventures fund. 

Founded in 2012 by IIT graduates Raj and Anshul Gupta, Box8 is a full-stack online food delivery player where it controls every aspect of its service including preparation and delivery of the dishes. Its menu consists of over 100 Indian dishes including meals, biryanis, wraps, sandwiches and salads.

The company was launched as a Mexican-only quick service restaurant chain (QSR) but it later tweaked its model to serve Indian dishes.

“We own the entire value chain across the four cities in our 110 outlets. We are the only player in the cloud kitchen business who own 100% delivery,” said Raj. “We have been very focussed on what we are doing. We have not done any marketing so far and have built the brand all through word of mouth.”

According to Raj, the company has not exhausted the money raised in its Series B round in 2016. “What we had last raised has actually lasted us till now. Since ours is not a high-burn business and we control lot of gross margins, so whatever money we raise lasts us for long. Till now, we have been very disciplined with our expansion. We are still present only in a few cities and gone deeply here, which helps build economies of scale,” he added. 

Padmaja Ruparel, co-founder and president at the Indian Angel Network (IAN), an early investor in Box8, said the startup' founders have the ability to create a distribution network and bringing all the cloud kitchen products at a "certain time, quality and price". 

"During their QSR days, they were already running operations in Mumbai and Bengaluru, and this was at a time when they tweaked their model. Also, the founders did not have any prior domain expertise, but only a technology background. This allowed them to do things differently," she said.

Ruparel, however, added that the downside of the cloud kitchen model is that it constantly needs more money, unlike a QSR model which is churning out revenue on a daily basis. "One of things that I would look in a model is to target loyal customers and customer repetition rate," she said.

The startup claims it is doubling its revenue every year and that its customer repeat rate is over 85%.

The startup also owns and operates the pizza delivery brand MOJO Pizza. It says that, in less than 18 months since its inception, MOJO Pizza has grown to be the "largest homegrown pizza delivery chain" delivering more than 300,000 pizzas a month. MOJO Pizza uses the existing delivery fleet, technology platform and the cloud kitchen network of Box8.

Recent deals in cloud kitchen segment

Cloud kitchen businesses, until recently the preserve of a handful of internet-first restaurant players like Rebel Foods, have become the new growth frontier for Indian food-delivery players over the past 12 to 18 months. 

A number of players are pumping in millions of dollars to muscle their way into the cloud kitchen business with varying strategies.

Here are a few other cloud kitchen startups that have raised funding in recent months.

  • March 2019: Rebel Foods, an internet kitchen platform that owns Faasos, raised Rs 110 crore as part of its Series D round led by Sequoia Capital. 
  • January 2019: Bengaluru-based FreshMenu raised Rs 21 crore from existing investors. 
  • January 2019: Cloud kitchen startup Innerchef raised $6.5 million in a pre-Series B round to expand its presence across India.
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