CloudKitchens raises $400 Million to Become Travis Kalanick’s 2nd Unicorn

Summary

Travis Kalanick and his company CloudKitchens partner with Saudi Arabia’s Public Investment Fund (PIF) to reduce the pain points associated with online food delivery. PIF’s $400 million investment will allow CloudKitchens to continue building Smart Kitchens dedicated to a delivery only business model. Restaurateurs will ideally be able to better scale their delivery operations by utilizing CloudKitchen’s seamless platform. 

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Travis Kalanick is now a second time founder of a unicorn tech company, following his well-known startup Uber. Saudi Arabia’s sovereign-wealth fund, the Public Investment Fund (PIF), invested $400 million into Kalanick’s new venture CloudKitchens at a $5 billion post-money valuation. With Kalanick’s own $300 million initial investment, CloudKitchen’s overall funding breaches $700 million. 

CloudKitchens fills an important and overlooked role in the growing food delivery market. Despite strong demand and efficient middlemen, food delivery is entirely reliant on restaurants, which are frankly inefficient given that their primary focus is individualized customer experience. Refocusing meal preparation on standardized menu items in a dedicated facility can drastically reduce costs while ensuring quality control.

The startup’s introduction comes at a particularly turbulent time. On one hand, the seemingly promising IPO market quickly turned sour, leaving investors wary of young unprofitable startups. For example, SmileDirectClub, a hyped unicorn with high expectations, priced its IPO at a valuation of $8.9 billion at $23 a share. Currently, it is trading at $9 a share with a $3.4 billion market cap, down almost 62%. Similarly, WeWork (another Saudi-backed unicorn) has found its valuation slashed in lieu of poor leadership, heavy debt burdens, and a shaky business model. In contrast, with historically low yields across time horizons and high volatility equity markets, investors are increasingly searching beyond traditional strategies for returns. The internet-enabled food delivery market, in particular, boasts a healthy 11.4% projected CAGR for 2019 to 2024, enabling the market to reach a $164.5 billion valuation, according to a report by IMARC Group.

CloudKitchen is uniquely positioned to conquer its market space thanks to its high-profile founding team, limited board seats, and unparalleled industry experience. With such low mortgage rates, CloudKitchen can easily scoop up properties and rapidly expand its physical presence. The company has already built heavy traction by forging several notable partnerships, including with Uber Eats, Doordash, Grubhub, Joe’s Pizza, and Halal Guys. CloudKitchen is poised for explosive growth.

However, such growth opportunities come with associated risks. Specifically, CloudKitchen’s founder Travis Kalanick was mired in personal controversy during his time at Uber. In 2017, when Uber was involved in scandals regarding his treatment of employees amongst other questionable practices, the board pushed him out as CEO. Despite his rocky history with corporate culture, Kalanick’s Saudi backers still believe he is the right man to scale a multi-billion-dollar business.

CloudKitchen currently stands comparable to Quibi and Outcome Health as one of the largest Series A round startups ever. Considering Kalanick’s past and the strong financial projections, the company’s saga will surely be one to follow.