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Welcome to the show by slash podcast my name is William von der Palen and Yeah, I'm trying not to freeze in the in the space this little box We are at slash 2021 and we've been joined by Jeanie and Ekin Newton welcome Hey, thanks for having us. How's it going? Super great to have you. We just listen to your talk and Super fun to have you on the on the show as well So do you want to start off by a short introduction of yourselves and your company? Yes, so I'm Ekin I founded a company called karma cans and karma kitchen and karma cans was our first business, which was founded in 2014 it's a corporate catering business Had a bit of a rocky year, but it's it's getting back on track. We do like food for tech businesses basically and One of our biggest issues was finding kitchen space So that led us to karma kitchen, which is solution for food businesses We build co-working kitchens for people in the whole food sector from delivery to production to Drinks everything everything so karma kitchen is a dark kitchen provider We take industrial warehouses and we buy them and sometimes these some two And then we basically fit them out as kitchen units So we split them into individual units of different sizes fit them out with all the equipment which we maintain and run and We then lease that those units up to businesses of all different sizes So just like Jeanie said we serve the whole food market everything from like tiny start-ups at concept stage All the way through to massive Multinationalists basically and we have three open sites to opening early next year And then we're opening we just bought another like we would tell you the multinationals are but I've been telling everyone And then I had an NDA email today, and I was like, oh, no, it's too late Do you think that they sent the NDA because I'm talking because you're talking about it too much What do you have to do with you what's the penalty? I don't really get NDA sometimes I'm like really but I didn't mention on stage today because I had that NDA email So it was a good Millions of people listen to this podcast Top-secret yeah, and what's your background? Did you have a background in the food industry before you started or so? We both see both went into this I was 21 when we started Karmacans, Eki was a chef back in the day. I was a kitchen porter Basically, this was our first job out of university the Karmacans job like a proper proper job And I was doing an MSc and kept basically terrorism and conflict studies at LSE not that linked to food No linked to food and in fact many of my my my my peers and not colleagues You know now they like can't really talk about their jobs because they're all doing kind of secret service I think and I'm the only person like come on like tell us about what you're doing That could have been you in secret so actually it's not very good at secrets, so maybe not There's apparently some British secret service people. I don't know if it's called secret service Well, I key was at school with them, so she would be able to point them out Well, I definitely the least sneaky out of them. Yeah, I'm very yeah, do they wear a black suit we like Really yeah fell into this and then started cooking and growing it from that point I was gonna say something that was completely unrelated to our company, but related to James Bond Do you can do that I'll skip it. Oh, I saw James I saw I saw I saw James Bond another film and he had an American accent I mean, I saw that one too. It was really strange. Yeah, the one with the murder mystery in the house Oh, I was out. Yeah. Yeah. It's the guy who's James Bond and I was like, why does he have an American accent? Yeah, and a very very American Well, I have to say once it was you get over the shock. It's kind of amusing. No, I loved it I just didn't get why James Bond was suddenly American And then everybody pointed out that he was an actor and that I had to accept that he would move on to new roles So They really do. What's it like working together as sisters? Yeah, I mean, it's amazing It's probably one of the best things at the beginning. It wasn't amazing. It was really hard We are very different people and we think in totally different ways I think that's why we've done well together at the beginning. We weren't sure what our roles were, you know I obviously now I'm kind of leading the commercial and sales and eccy's strategy But at the beginning we were both cooking in a kitchen and cycling together and eccy is the trained more trained chef So she had strong opinions about the way the food should be and I did too. So we used to fight I don't need I think it's been an amazing working relationship and I you know You're like my best friend, obviously And I think you know, we just get on we get on so well. We spent all of our time together It's a real pleasure to spend time together and but we don't you know pull any punches I think when you're working with a friend or with a colleague it can be difficult to resolve conflict or when you experience conflict the tenancy can be to shy away from it and When you're sibling, you're obviously very used to resolving conflicts with your siblings so engaging engaging with it and It comes naturally and you get you know, I think it is important to have that You know people say do you find yes, we do fight But we also are really good at like resolving and making up and also Collaborating on decision-making where both of us disagree with each other and then moving forward from that point through Maybe disagreeing or like trying to persuade the other person You find that the first idea you had is often not the idea that you end up with at the end of it You know after the after the debate and it's funny when we work with people who are not Who maybe are not siblings, but friends or some business Well, just you know sometimes when you some people that come into the company are quite used to making Independent decisions without informing or consulting with other people in their team You know, maybe they've worked in a team previously where they can just go ahead and make a decision And then that's that's that our team is very Collaborative everybody does a lot of like listening and debating and really like our role is not to like shut down the listening debate But to encourage it and then at a certain point say okay, right decisions made now we have to execute on that and You know our role is to like hold people to the execution plan rather than hold people to like the same kind of Idea and not to disagree because that's when you get the best Outcomes was when everybody thinks differently and everyone's super diverse in their thought processes and is hard in a meaningful way And you can like kind of fight through it and then Execute. Yeah, basically. Yep. Yeah, usually you need a disagreement to see the question on a different level Just sort of synthesize the two theses We really do approach everything in a very different way I was reading I was reading at thinking fast and slow again the other day and and he said something really interesting He was like people don't feel any subjective discomfort So, you know when you when you have an opinion about the world, you don't feel uncomfortable that you don't have all the information It's just you feel right. In fact, you feel the opposite You feel very confident and and I think that that's kind of what we're quite good at calling ourselves out You're like you just think that because that's your experience And and you're not you're missing all of this information. It's like often when you bring to me It's like you're missing the client's perspective here. You want to increase pricing, but you're missing Yeah, yeah, it's a classic done in Kruger Yeah, yeah, yeah, but when you do it, you know, you do something out of passion something. That's your idea It's super easy to think from your own perspective as well. So and especially in food related stuff I've also had to learn the hard way to to also put stuff on the menu item person It'll like but as long as someone else likes it or loves it then, you know, that's to work That's the classic chat isn't a genie. Yeah, I mean the sales So with the catering business the kitchen have an idea of like what the customer wants for the sales team actually knows What sells more and they know like what the office manager for that corporate is going to order on repeat And so that is definitely a problem we have best sales like we just put these on We're gonna make way more money in the kitchen like but I want to try this like Experimental thing with like a spice that no one knows what it is. So it won't order and it's just Yeah, it's all people in the UK in the office. Do not eat mackerel. Okay. Good to know Yeah I was gonna ask this anyone eats Okay, but you went from the kind of lunch catering company and the idea there is you you made the food for the tech companies And then you cycled it out on your own you didn't use like secondary delivery services Or we actually built our own fleet of cycles. Um, so we've got our own team who I've got our own bikes Cargo bikes with the big baskets at the front They can fit like a hundred lunches in them each and then we have like a cyclist that goes to each section of London So west central and then delivers them out. So yeah, we ran everything from the cooking and the delivery Obviously one of the first companies that we're doing it pre-delivery and then now that's so I mean now everyone's doing delivery and Grocery delivery, so it's a different market Exactly, and then you kind of by chance or by by your own need stumble across the idea of maybe, you know Or the fact that it was hard to find kitchens and like the investments were heavy and all that kind of stuff related to that And the lead times are long and exactly So we with our catering business really couldn't buy kitchen space. We end up sharing a restaurant kitchen in Soho We were growing so quickly got kicked out that kitchen because we're basically taking it over We built our first kitchen which was so expensive for a small business to and we nearly fail from doing that And then we moved again within three months So we moved three times in one year You can see like as a small business the capital that you have to invest that is just crazy And when we finally stabilized and we took a warehouse in Hattney We were committing to five-year leases and we weren't making enough money to really commit to five years It was terrifying So we ended up subletting the space of people in food. We had a rice production in the corner We had a woman who did like catering who took it when we left the space and it basically came this like food ecosystem And it wasn't built to share and we thought wow if you build a space to share like if you so cool Like you could get so many brands under one roof great things happen And when we've kind of stabilized our business then we were like, why don't we be the people that do that? So that's what happened. I think that in any market there's always big You know, there's always barista entry and in food and drink The barista entry are very high and the funding is quite hard to come by so If you want to start a restaurant in London, it's gonna cost you about half a million pounds Or maybe even a million and take you about a year to get it up and running and with karma kitchen You can be up and running in two weeks and it costs you 10,000 pounds So, you know, you're bringing down the barista entry so significantly that it's a note You know, it's like a simple decision for these businesses to take these risks And we've had businesses who are using our service who've opened 16 sites in the last year, you know it's incredible and They don't feel overstretched and they don't even need to raise money to do it Which is pretty game-changing. I think and you can really see the impact In the growth of the businesses that are even in our space alone. Yeah Investors think so too apparently. I mean you've raised a hundred X compared to what you at some point thought you were gonna Yeah, this is one of the stories that is like Is there one zero too much or two or a lot of people asked us if it was a spelling mistake But yeah, we were raising the wrong place originally, you know, we were looking at VC money with and we were building something That was very capex heavy. We were meeting with so many VCs. We had a lot of rejection. Love people love the idea But they just didn't yeah, that's not the way it works So it was kind of like we had to relook at where we were focusing and that's when we kind of discovered as people who Never raised money before, you know our first business was revenue driven that private equity is a really good route for us because it's actually You know you buying assets and it's more of a you know real estate take on it So it's funny like now looking back at it We just didn't have the knowledge of like where to raise money and now if we went out and did it again It hopefully would have taken us as long I mean who can say no no no it's not easy for us. We struggle with fundraising. I know it sounds like a good story But it it was very hard and even when we kind of got the deal that we wanted COVID hit and our whole deal collapsed, you know, we paid for the legal work We had a term sheet and then the money was meant to be in our account all of the legal work for the entire deal was complete and The deal just fell apart, you know, right at the very beginning of COVID Nothing to do with us. Just it was the funding funders issue and and we had to yeah We had to go back out three weeks. Yeah, we had three weeks to do it And then we did it. Yeah, pretty much in that time. But I don't think it's gonna get easier either I think every fundraise will just bring you out problems and issues. Yeah, they all probably have their own challenges They do they all have their own challenges. I think You know your network in increases every deal you do and if I had to say one thing It's like just make a big effort with everyone be patient with everyone and be nice like I know I know that you know Being polite and being nice isn't always like the thing that People talk about but I do think it is important to like Respect the fact that people are taking time out their day to listen to your business and asking you questions to understand it better and And just to be like, you know Supportive of that because it can be difficult when you're trying to get to know a business that you don't really understand anything about And you're just asking questions about information. You just don't want to end up getting defensive I definitely recognize that myself at certain points like maybe over the last three years and just have worked really hard to Just address that be like wait, I need to change my my way What was the logic behind buying the Warehouses and not just because that instantly turns it way more capital intensive So basically our sites last for a really long time They last for like 20 30 years and the kind of infrastructure that we're building is built to like really pay back over the long term So a typical lease length in the UK has gone from 20 years to like 10 years to five years And and the kind of sites that we take are very competitive And the land value is increasing quite a bit and the rents are really going up And there's more and more competition for that kind of space from last mile logistics companies but also from housing developers so they're squeezing everyone squeezing on a limited pool of space available and That means that your lease when it comes to your exit point You know your leases may only last for another five years and not be renewable And then what will happen you've invested millions of pounds and did just the capex and you can't move that stuff outside It's kind of the McDonald's model like the land itself will become more valuable than the business at some point Maybe at least it'd be a good part of your balance sheet But also you'll be able to hold the value in the business over the long term So at any point of exit you can insure that you've got 20 30 40 years Where karma kitchen can operate in that site uninterrupted? We're also investing a lot of capital into these sites And we do have a few leasehold but when you own the freehold you have the freedom to really like spend that money So for example building green substations in partnership with another company And if we lease that it probably wouldn't be worth it But because we're owning that site it really is and Echie and I really want to try and build Kitchens in a green way. It's kind of never been done. So it helps us hit those goals if we own the freehold Yeah, and it's actually a surprisingly easy thing It's an expensive thing to do But it's an easy thing to do where you can basically change if we get to our target of 30 sites the next like What is it three four years? We will be supporting around Three four thousand food businesses in the UK, which is a lot of businesses. That's you know That's a lot. That's like a little buying power. That's a lot of buying firstly Yeah, it's a lot of buying power when it comes to the way that waste is processed or what kind of packaging those businesses use Or where their power and electricity comes from we can control all of these different levers and Really start to pull the biggest ones when it comes to building design and make our spaces You know net zero hopefully By the end of next year will have like be well on our way to doing that And that means that every business that comes through our space without having to try and Think because it's hard to make those decisions when it's just you making this decision The best feel the effect of it. Yeah, it's maybe not the first thing a small business will invest And you know sustainability is very powerful when you don't have to think about it, right? So if we're doing all of that, we're choosing the supplies that are coming into the space We're providing the space that is that then it's and we manage all the waste as well So businesses don't even have to think about resecting oil. They literally just throw it into a bin and then we sort it So What about the what about the how do you acquire customers and what's the model there like how do they How do they tell us how you We don't have marketing that is actually crazy thing But I was talking about this earlier like someone asked me how much we spend on marketing I was like, we really don't spend anything marketing We have a very direct to business debate like we our sales team just reach out constantly all day and we're selling a solution So right now it feels like it goes really well, you know, you're providing a space that's like not that much capital It's great. I mean our space are beautiful. They're all glass. They're all bright But we basically I mean obviously had a little bit of press recently which helps build your profile But for food businesses, they don't really read those papers So it's very much about getting out and being present at you know markets and connecting with the communities that you're going into You know, you want people in your community to know who you are and liked ordering from you And the most important thing for us is about building a good and trusted relationship within every community We go into so, you know people have been to the site. They know what it's about They know that we have five-star Yeah, and I think the big kind of achievement of that is when our brands post about their food they tag It's coming from a common kitchen. So they're proud of saying where their food You know where the restaurant is if it's Byron or whoever and and just yeah, and I think that You know, we talk a lot about just get the get the basics, right? We're there to do operations and do them well Get those things right every single day be consistent about it and of course things go wrong things break It's just how it is you you run restaurants, you know If this if you leave something in the kitchen, you've got a brand new coffee machine that that will definitely be broken by the end Of the week. It's just it's what it is. Um, but you know fix it fix things fast Make sure that people know who they can speak to Address all issues quickly and when you're getting the basics right like that, you know That's the beginnings of a good marketing campaign I think we did have a conversation about marketing remember the sales team came over and we're like Guys, have you Social medias like we could be on all the social media and like it's funny because all of our team is you know Especially I say something quite young and very up on like knows everything about it and talks to our clients a lot But it was just such a funny comment. I was just listening to it in the back Yeah, I guess we should do some marketing Then because you're building a brand also even though you're B2B to see company You need to figure out your own brand as you said that that people then trust it and wanna wanna even though They don't know the specific restaurants in your karmic kitchen set up They will maybe try it because of karmic kitchen So then that brings value also obviously to the restaurants joining you I think we just need to build as much trust as possible around Karmic kitchen and around the kind of services that we offer to end consumer to our small businesses and also to our large Large multinational kind of clients. They need to trust that we have the cloud to like deliver a network for them That really works and same thing cross-bord What about finances then your capex heavy You're also Operationally probably front-loading quite a lot with building the kitchens and trying to get everything cash flow positive with the restaurant from the get-go Maybe some restaurants don't work out as well as expected and all that kind of stuff So how do you like finances and manage cash flow and so we don't touch any of our Our businesses like revenue line. We just they just they pay us rent and then they can buy into extra services That can also improve their own bottom line But Usually with a with a site and it makes an operating profit just within the first few months that it opens so And then it will take about 19 to 22 months to fully pay back Okay On the capex of us it if you lease the building if you buy the building it's a longer payback But it we don't work it out like that We work it out in a more kind of property real estate way on based on freeholding on cost and You know our business is fortunately right now like delivering an outstanding Freeholding on cost on most of the sites that we operate even ones where we're really investing heavily in them And that's because we deliver a good service to our clients and we deliver a space that is in demand and Can offer the kind of network that businesses need to like tap into and use across cities Space of different people in different food industries No, if you were not just delivery, you know, we do corporate catering drinks everything So it means that you're very resilient and when you have like a churn of a restaurant You have more options to replace that You know business with yeah, do you still provide your own like delivery fleet to these kitchens? So or do they just become a can actually that's the other ones use No way are we ever getting involved in that again? No Do ask us I guess so when you're gonna start doing like your own fleet honestly running logistics business Like that. I don't want to do too. That's a different animal. It's a completely different piece I mean just I think it's just hard like also with cycles now I mean the demand you've got so many grocery deliveries You've got all the aggregators like just deep delivery. Well, everyone is looking for cyclists So it's a very different recruitment experience now. Yeah Speaking on the fundraising thing again a little bit because we've been talking to a lot of VCs and We've spoken about the relationship between VCs and founders But from their perspective mostly so what what went into choosing who you chose in your funding rounds and how much of How much of like assessing personal chemistry was involved there? Yeah, I think That's so funny. Do you remember that woman? He was like a psychic, you know, she was a psychic for fundraising And what? She wasn't a psychic for fundraising. She was just a she did tarot Like but she did and she read my reading just before doing a raid She said that she was like she focused on I thought she focused on no That's what I thought. I thought the relationship the cosmic relationship Okay Between The fact that you know the founding team and the investor and works out if they're a good fit Yeah, and she once offered us a services. I mean to be honest. I knew it was gonna cost us loads of money So I thought we won't go down that route Was she a consultant that was hired to do this as like a she was a mystic a consultant But also a mystic who who's who's strategy? I mean, I would love there are so many interesting jobs out there And I think I think it's something that you definitely didn't really focus on enough at the beginning And now it's something that will be a real focus and now for us But I would say so key because you're is a marriage like, you know, you're working together so closely I would say that across the board. We've met some excellent investors who have really, you know supported us the whole way through and And it's been really our first and one of our investors is was a customer our first customer calm accounts So he's the order lunches every day for his whole team and now he is an investor in karma kitchen The most important thing about your investors is that they have the money to fund your growth and that's really really important That is yeah, that's really important You still work mainly with private equity or do you also now once you've validated the model with be do you have some VCs now Coming on board for the later series with bigger tickets or I think we definitely opens that I mean we we don't we're not looking to raise right now We are pretty comfortable with private equity, but for sure as we expand tech and team We'll be looking more at the VC route maybe later on the line Okay Yeah, what about you two because you mentioned a few times that you're a bit different But you work in tandem in this unique way that kind of can be seen just by looking at you kind of interacting Do you want to look? What are the differences? What are you like and how do you like? I'm good at answering so and I would say that We work in a kind of strategy and execution style Yeah, and so we will talk Obviously and you it's not like you don't and aren't involved on in the strategy But like if we have a big new thing to Understand and think think through a new strategy to the plan and execute I'll write up the strategy and we will discuss it internally, but you are responsible for Getting shit done basically Echie has is incredibly creative in her way of thinking and she comes up with wild ideas sometimes Genius and sometimes I just don't think we can ever execute and that's like no my job is kind of to be like okay Cool, this is really interesting not at I like it, but not right now or yeah This is cool. Let's execute it and this is how we'll do it So usually that causes a big fight with the argue about yeah I'm like I want to open a speed dating and spaghetti making concept restaurant where people will fall in love Over spaghetti while they make it on the same spaghetti in there It's me like you gave this a green light and we actually did do this one I want to build a giant avocado and I want to sell duck wraps from it I want to call it quacamole. We did that one too So I went open a restaurant next week and you were like no you have to wait two weeks to do that So it's a funny relationship. We very much. Yeah, I think it works It works and I think you know so in in the actual business sense of it, you know, I think you do need You do need that balance between the idea and the execution and execution is like you will not have a business Again, well, that's unless you can execute when you're hiring if you just you know Don't have a co-founder and you are the big thinker then you need to remember not to just go with other big thinkers You need to have executors in there, but you just need someone to actually go and make it happen. So Yeah, that's very true. And I think what else what's what are the differences? Do we have? That is me one. I mean, you're really good at sales. That's really keeping we have different skills Like I started out in operations and genie started on sales I mean it's kind of it's great having so when you start business one person in the in the founding team that can sell Because then you don't have to pay someone and you're the one that brings all the money. Yeah, that was definitely helpful Keep core relationships like without a sales team sales. It's like, yeah This has been a delight. Yes. I think we have some people knocking on our cube door. Unfortunately. Thank you guys so much Thank you so much. Thanks for meeting you and good luck. Thanks for the viewers and listeners. See you in the next one Bye-bye safe guys. Bye-bye