Gobble Finds Its Sweet Spot With NFL Star Richard Sherman As Investor
When Ooshma Garg set out to raise a second round of funding for Gobble in 2017, many investors thought the odds were stacked against her—and with good reason.
Blue Apron, which dominated the meal-kit industry with 40% of the U.S. market, was grappling with tumbling shares, low customer retention, layoffs and new rivals. More recently, Weight Watchers and Walmart added a dash of salt to the company’s wounds by announcing a line of mealkits to be sold in stores. Blue Apron’s largest competitor, HelloFresh, claims about 28% of meal kit sales, followed by Home Chef, Sun Basket and Plated, according to an October 2017 analysis from research platform Second Measure.
At 1.3%, Gobble has only a speck of the market. Despite the unsavory headlines surrounding the industry and Gobble being among its smallest players, Garg managed to secure $15 million in Series B financing last October. Since then, Gobble has expanded to 36 states. According to Forbes estimates, the Palo Alto, California-based company pulled in between $25 to $50 million in annual revenue for 2017. Garg, age 30, says annual subscriber revenue has grown roughly $1 million every week since the start of 2018.
NFL star Richard Sherman joined the Series B round for an undisclosed amount. The San Francisco 49ers cornerback attended Stanford University with Garg. “The $1 million of new consumer revenue per week definitely grabbed my attention,” he says. While Sherman is best known for investing in cryptocurrencies, he also wanted to diversify by backing a startup with a brick-and-mortar facility. “I was interested in the logistical aspects behind the food-tech and how and where they were going to distribute and package the meals,” says Sherman.
While tapping her alumni network helped, Garg says fundraising the second time around still presented some challenges. “Closing our Series B took a one-two punch,” she explains. The first punch was meeting as many investors as needed to find the one that is the right personal fit. She was surprised that despite her track record, many male investors still responded to her pitch with: “Let me ask my wife.”
“This shows the difficulty of how decisions about your business are being made. They should be made by smart, open-minded individuals who can assess all the possibilities based on financial principles,” says Garg. “It takes a lot more time to convince investors to back products targeted for women.”
The second “punch” required having the ability to explain the startup’s market opportunity in the most digestible terms. “When you’re passionate about something, you end up explaining it in a convoluted way. The trick is to make it dead simple.”
For Garg, this meant articulating her startup’s point of differentiation in a crowded market where established competitors already dominated the 20-to-30-year-old market. After launching routine visits to customers’ homes, Garg stumbled upon a game-changing revelation: couples age 30-40 desired the satisfaction of mixing, sautéing and garnishing their own meals, but lacked the time.
How Gobble Found Is Secret Sauce
Garg started Gobble in 2011 soon after exiting her first venture, recruiting platform Anapata. Startup life took a toll on her health with sleepless nights and a reliance on fast food. When her father brought her luggage filled with North Indian dishes of protein-rich lentils, vegetables and homemade breads, Garg began to envision Gobble.
“I came from a family that saw food as love, so If that’s missing then I’m living an unfulfilled life,” she said. “Having spent a great deal of my adult life solving this problem for myself, I realized other busy professionals needed it too.” This inspired Garg to start Gobble in 2011. It was originally a delivery service for fully-cooked meals made by local chefs and operated in only eight West Coast states.
Since then Gobble has evolved dramatically. As an alumna of seed accelerator Y Combinator, she learned the importance of breaking away from constant coding to spend quality time with the customer. At Gobble, she conducted weekly visits to customers’ homes during suppertime–a program she called “Dinner in Progress.”
“Fully cooked, delivered meals have no soul” she learned. “It’s one temperature, one texture and sometimes, one blob. It’s food as fuel, but it’s not satisfying,” says Garg. This eureka moment for Gobble led her to pivot in 2014 to a DIY meal-kit subscription.
After refining Gobble’s focus to the semi-prepared model, she raised a $10.75 million Series A round from Trinity Ventures and Andreessen Horowitz. She concentrated this first batch of capital on culinary R&D to figure out how to develop sauces and shipping methods for delivering fresh, but partially cooked foods. “Par-cooked ingredients” shrunk prep times from 30-45 minutes to 10-15 minutes for older Millennial couples. But with so many companies entering and tanking in the food-kit space, was her differentiator enough to win against the Blue Aprons and FreshDirects of the world?
“You can’t build for everyone,” says Garg. “We’re not optimizing for singles or empty-nesters, so that ruthless focus on a core demographic is what makes you a must-have for some versus a nice-to-have for everyone.” Garg’s sweet spot is tailoring all recipes, food portions and pricing models for families of two to four.
“Being clear about your customer is how you win in food retail,” she says. While an October 2017 study by Second Measure exposed Gobble’s tiny market share, it also showed that it beat behemoth competitors in two key categories: customer retention and customer spend. These stats locked in most of her Series B investors. “The numbers spoke for themselves,” said Garg.
While the fresh capital has fueled Gobble’s rapid expansion to 44 states, Garg is still committed to learning. She has established “Dinner in Progress” as an official company department that requires all Gobble executives to conduct weekly home visits in cities across the country because “nothing is dogma and everything should be continually improved.”
This philosophy touches every corner of Gobble. For instance, they micro-experiment with cost-effective packing materials and box configurations. Slight variations in where they place each packet helps certain foods stay colder, saving money on ice packs and insulation. “The difference in packaging can be pennies per box, but when you’re shipping hundreds of thousands of boxes, they add up.”
Because Gobble dedicated most of its Series A to hiring food scientists for culinary R&D and developers for customer algorithms, it lacked the budget for marketing. So Garg plans to allocate a chunk of the Series B to its first marketing hires and launching commercial campaigns featuring Gobble’s newest investor. Sherman says he’s on board: “The more I learned about Gobble and Ooshma’s mission, the more I was blown away and wanted to be part of it.”
“We searched sports, music and movies for the right individual investors, and we chose Richard because he’s a true renaissance man: a savvy businessman, an examplary family man and world-class athlete,” says Garg.
Source: Forbes | Tanya Klich | April 2, 2018