Our Investment in Notch
Today, Golden Ventures is pleased to announce our investment in Notch (formerly ChefHero), a company that is building the digital marketplace and network for restaurants to order wholesale food and supplies. We are thrilled to be out of stealth and partnering with Saif, Diego and the rest of the team to help bring operational efficiencies and increased transparency to the foodservice industry. It is also a sector that we have learned a tremendous amount about, through our investments in Ritual and Skip The Dishes (acquired by Just Eat).
Our investment in Notch was “pre-seed” in nature. The founders came armed with industry experience, a working prototype, and a clear go to market strategy that included a pipeline of customers. In getting to know the team, we were enamoured by their grit, focus and how coachable they were. Since then, the team and business have continued to scale. Saif and Diego have shown a remarkable ability to attract top-tier talent, make the hard decisions needed to grow the business, all while staying humble and focused.. People who meet the company always remark on how well the team knows their business and the levers that drive it. Notch’s capital efficiency and focus on execution helped entice our friends at Accomplice to lead their Series A late last year.
A Massive and Fragmented Foodservice Market
According to a FY2017 Sysco filing, the annual North American Foodservice market is $280B. The market is serviced by Broadliners (41%), wholesale outlets such as Costco (10%), and the remainder (49%) by the ~16,5000 mid-size and “mom and pop” distributors.
On the supply side, the dominant operating systems for the industry are proprietary closed systems or paper, pen and archaic desktop accounting software. The foodservice industry is logistics heavy and operational/human capital intensive, which makes it a very high GMV but low margin operation to run. Many of the players are generational, family businesses that have been passed down with established (but antiquated) systems and processes that “just work”, but are suboptimal for the restaurant operators.
On the demand side, there is a fundamental shift that is occurring. The rise of large restaurant groups, multi-chain QSRs, and sophisticated operators is drawing additional attention to the unit economics of operating a location. Rising wages and real estate costs puts additional pressure on operators to control their supply chain more efficiently. Restauranteurs frequently work with 8–10 suppliers, resulting in in 15–25 deliveries and waste 10–15 hours/week on procurement related activities. Distributors operate in a largely opaque market, allowing their price/service models to perpetuate and profit from the inefficiencies at the expense of the restaurant.
Enter ChefHero — The Distributed Wholesale Food Marketplace
Through demand aggregation and the use of technology, the Notch platform creates value for all stakeholders. For suppliers, Notch aggregates demand, improves buyer predictability, dispute resolution, order accuracy, dynamic routing and faster payments. This makes Notch orders less costly to service than traditional ones. For foodservice operators, the platform provides buying power, streamlines the procurement process that integrates seamlessly into their existing workflow.
While Notch’s solution is simple to use, beneath the surface, you will find a powerful, robust product that was anything but easy to build. Foodservice data has traditionally been siloed, and the incentives for suppliers to cooperate have been scarce. By centralizing the datasets, workflow, and transactions, Notch can apply machine learning and predictive models to create economic benefit for the entire industry.
Ultimately, Notch enables buyers to purchase their wholesale supplies online, at a fair price and suppliers can focus resources on delivering superior customer service.
What’s Next?
Post Series A investment, the team will continue to focus on adding high caliber talent and expanding the geographies in which they operate. We expect the team to quickly move from the hundreds of restaurants they service today to thousands in the very near future. We are excited to continue working with this team and help restaurant operators and foodservice providers work together more efficiently.
In building Notch, we were fortunate to partner with several great investors including: @AccompliceVC, Garage Capital, Hedgewood, MATH Ventures, @PrecursorVC, and several angel investors.
