In 2015, White Star Capital invested in the seed round for Freshly, a promising US meal delivery start-up with a mission to bring fresh and nutritious gourmet food to customers on a convenient and affordable basis.
At the time, we were highly excited by the size of the market (US consumer spending on foods and snacks even then represented a US$1.4tn potential market); the solid, passionate and well rounded team led by Michael Wystrach; and their track record of execution even at an early stage.
In 2017, we came across a very similar company — Butternut Box — led by Kevin Glynn and David Nolan, a pair of ex-Goldman Sachs traders who had a very similar mindset to bring fresh and nutritious food but to a very different consumer base — pets.
Whilst the parallels were not immediately obvious, the team had the same level of passion and the European market potential was also attractive with an estimated size of US$29bn.
Fast forward to today — we subsequently doubled down on both our initial investments in Freshly and Butternut Box and they are both success stories for us, representing some of the best performing investments in our portfolio.
We were able to add value to Butternut Box, not only through our deep experience in the sector but with our unique relationship with Freshly — introducing Michael to become part of the Butternut Box board and together helping the company avoid potential pit-falls to achieve faster, successful growth.
WSC Launch and First Investment in South East Asia
At White Star, our pace of investment in South East Asia is beginning to take seed. With the opening of our Hong Kong office this past year and the launch of our Tokyo office in 2018, we’ve dedicated investment resources to explore the burgeoning ecosystem throughout Asia.
We were highly excited by the growth opportunities in the South East Asia ecosystem and particularly saw strong potential for us to be able to add value from our experience within specific industry verticals. To this end, we recently released a market report on the South East Asia VC landscape. One of the key findings of the report is that SEA benefits from favorable young demographics, with both a rapidly growing base of internet users and rising middle class.
With this background, it’s no surprise that our first investment as we expand to the Asia market is Dahmakan — a South East Asian food delivery start-up with a focus on healthy, affordable food. Headquartered in Kuala Lumpur, Malaysia, the company recently expanded to Thailand and is continuing to build their end-to-end operating system, powering the entire value chain from product development to last-mile delivery from a network of “satellite” distribution kitchens.
Many of the same underlying investment rationale applies to Dahmakan — we were inspired by the management team and both their passion and execution track record.
Whilst the South East Asia market is still developing, ecommerce is expected to grow to be worth US$300bn by 2025, with Food Delivery GMV alone expected to reach US$20bn in that time.
Future Battleground for Food Delivery
With the market for food delivery at an early stage of development, there is already heightened activity to define the future of the segment within South East Asia:
- Logistics providers — Deliveroo, Grab and Gojek have been battling to become not only the favoured Food Delivery platforms across the region but category defining ‘SuperApps’.
- Cloud Kitchens — pioneered by ex-Uber CEO Travis Kalanick, there is a rising trend for both providers and operators of CloudKitchen to meet the rising demand for online food delivery.
Although we found some of the emerging Cloud Kitchen start-ups highly interesting, we ultimately felt that their approach was still very traditional, meaning their ability to scale was likely to be more linear. Over time, it seemed that negotiating power would gravitate to the delivery platforms themselves eroding their ability to earn out-size returns.
Dahmakan’s Unique Approach
We were therefore very excited to be introduced to the Dahmakan management team, and learning about the company’s unique approach across the region — an affordable large volume focus on the mass-market segment.
While we don’t believe this is a “winner takes all” market, with meals at a price point starting at RM12 (under US$3), Dahmakan is able to represent an affordable, high frequency dining option for a highly selective and price sensitive Asian consumer.
Their approach is very much a large volume, mass production model that provides economies of scale that most other restaurants or cloud kitchen operators are unable to achieve. This also allows it to achieve unit economics and profitability that drove our belief in their business model to outperform and become one of the leaders within the segment.
This is reinforced by the close relationship between the founders — CEO Jonathan Weins, COO Jessica Li and CTO Christian Edelmann, which reminds us of the Freshly and Butternut Box management teams and provides us with confidence in their ability to persevere through hard times and to outperform in good times.
We are very pleased to close our first deal in South East Asia as part of Dahmakan’s US$18m Series B round, investing alongside great partners such as Rakuten Capital, JAFCO Asia, the GEC-KIP Fund, Woowa Brothers, the former CEO of Nestlé Germany, Partech Partners and Y Combinator. We are excited to start this journey together with Dahmakan as it expands across the region.
About White Star Capital
White Star Capital is a global multi-stage technology investment platform that invests in exceptional entrepreneurs building ambitious, international businesses. Operating out of New York, London, Paris, Montreal, Tokyo, and Hong Kong, our presence, perspective, and people enable us to partner closely with our Founders to help them scale internationally from Series A onwards.
Find out more about how we venture beyond at www.whitestarcapital.com or follow us on LinkedIn, Twitter or Facebook.