She's HelloFresh, exciting ... Why the Berlin meal delivery startup just raised $50 million

Meal delivery startups are mushrooming all across the globe as consumers spend less time shopping and more time cooking. Berlin's HelloFresh just raised $50 million - CEO Dominik Richter tells us why.
She's HelloFresh, exciting ... Why the Berlin meal delivery startup just raised $50 million

For many people, the idea of searching for a tasty and healthy recipe, trekking to the supermarket for ingredients and then actually cooking the meal from scratch can seem both romantic and daunting (but mostly the latter) – especially after a long day of work.

It's no surprise, then, that with the rise of e-commerce, more and more tech startups are offering to deliver meal kits to your doorstep so you can skip the time-consuming shopping aspect and just cook.

The meal options aren’t too shabby either: There’s pan-seared cod with parmesan-crusted squash and roasted red potatoes, which will be about 500 calories per serving. Or pesto flatbread with asparagus and broccolini, which will take you about 35 minutes to cook.  Or sweetcorn fritters with grilled halloumi and zesty salsa, which you can enjoy within five to six days of delivery.

The promise: Convenient, fresh, simple

Not only are these startups increasingly appealing to busy consumers, but also investors.

According to Dow Jones Venture Source, in 2009, VCs in the US funded 24 food-related companies, compared to 57 deals in 2013 in this space. Though the numbers in Europe are slightly smaller, there's still a notable jump – in 2009, European VCs made 13 deals in this sector, compared to 24 in 2013.

In April, New York-based Blue Apron, one of the key players in the bustling category, announced a $50 million Series C funding round let by Stripes Group at a reported $500 million valuation.

Less than two months later, Berlin-headquartered HelloFresh – an early entrant in the space – announced a $50 million Series D financing round led by Insight Venture Partners, although it declined to disclose its valuation.

Following HelloFresh’s financial boost, we visited the company’s headquarters in Berlin on a humid summer day and chatted with CEO Dominik Richter (pictured below), 28, about the intensifying competition in the meal delivery space, working with Rocket Internet and why it's only the beginning.

Dominik Richter

HelloFresh: The jist

In a nutshell, HelloFresh delivers subscribers one box per week, which contains a number of recipes (typically three) with pre-measured matching ingredients for either two or three people. The cost? From about 39 euros a pop. Both meat-eaters as well as vegetarians can use the service, although the variety for the latter is more limited.

At the moment, there's a number of direct rivals of varying sizes spotted across the globe including: Blue Apron, Plated and Chefday in the US; Gousto and Housebites in the UK; KommtEssen, Kochzauber and Unsere Schlemmertüte in Germany.

But despite growing competition, Richter doesn't believe the sector is a crowded space.

"I think if you look at the overall grocery market – a trillion dollar market – there are multiple supermarket chains and so many food brands in each market," he explained.

"When you talk about one country with a competitor, or another competitor in the UK, then I don’t think it’s a crowded space at all. I also don’t think we fight for a finite amount of potential customers, but actually this can be a very mass market product – and the mass market is really, really large. I think there's potential for a couple of players in each market."

Building with Rocket Internet

In 2011, Richter, alongside co-founders Thomas Griesel and Jessica Nilsson, moved to Berlin to start a company together. After looking at different business models and industries, Richter said they quickly set their eyes on the grocery space.

"On one hand, we saw a market opportunity and on the other hand, which I think is very important, we saw a space we could identify with and really wanted to work in," recalled Richter. "I’m into fresh food and very much into nutrition – we’re all kind of like foodies in a way."

HelloFresh office
Recipe cards lined up on the wall of HelloFresh's Berlin office

Founded in November 2011, HelloFresh was initially backed by notorious company incubator Rocket Internet. So why did the company decide to work with Rocket?

"The way we initially thought about it is, 'Look, this is a really cool idea. We can build it up in Germany and do that for three or four years... And then maybe after another three or four years, if we’re able to attract funding and execute really well, look at the next country like Austria, Switzerland or something'," Richter responded.

"So that was option number one," said Richter, who started two companies previously and did his bachelor's at notable German business school WHU-Otto Beisheim School of Management (a name that pops up often among German entrepreneurs).

"Option number two was that we could partner up with Rocket and make use of their global platform."

Since it was the first "larger" company that Richter and his co-founders wanted to build, they thought it'd save a lot of time and struggle in setting up the business if they were able to leverage Rocket's resources in terms of HR, legal as well as setting up legal entities in different markets.

Essentially, it'd cut out the time that most first-time founders need in order to navigate and figure out these aspects of the business.

"For us, we were like, 'This is a unique market opportunity – we can tap into all the e-commerce markets in the world,'"  he added.

It's just the beginning

Currently, HelloFresh is in six markets: the US, UK, Germany, Netherlands, Austria and Australia. Though the headquarters are in Berlin, the 120-person team is also spread across offices in New York, London, Amsterdam and Sydney.

Richter told me that by the end of the first quarter of 2014, HelloFresh delivered "well over one million meals per month".

Comparatively, Blue Apron's 200-person team reportedly delivers 600,000 meals a month to its subscribers and only delivers to "most of the United States".

On a progress scale of one to 10, Richter said HelloFresh "is probably in step two or three" right now.

The company doesn't see the need to expand right now, however, they'll be using their fresh Series D cash injection on developing the ability for subscribers to further customize their boxes as well as improving the user experience.

So what does the future of HelloFresh look like?

"Once a week, a box is delivered that contains a number of meals you can easily cook in 30 minutes within your desired calorie range – and always meals you like," he answered.

Not only that, Richter wants HelloFresh subscribers to be able to choose a certain time slot that's most convenient so the boxes can be delivered seamlessly, every time.

"That’s the value proposition that appeals to wide segments of the mass market – I think it can be much, much bigger than it is now," he said.

Featured image credit: Courtesy of HelloFresh.

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