Recipe for success
Gousto began life selling recipe kits from a stall in London’s Brick Lane. Today it’s a British success story, employing more than 200 people and backed by a £5 million venture loan from Barclays.
Five years ago, companies like Gousto didn’t exist. There was a proposition: home delivered recipe kits that offer variety, minimise waste, and take the hassle out of food shopping. There was a market: the UK grocery sector was worth £169 billion in 2012 and £181 billion today. There was also a founder, Timo Boldt, who had experience advising entrepreneurs in his previous career in Investment Banking, and who had a strategy to grow the business from a stall in East London to a booming employer with tens of millions of pounds worth of backing.
Gousto’s Chief Financial Officer, Sally Matthews, describes Gousto as “both a physical business and an e-business. We have our headquarters in London and a factory in Spalding, Lincolnshire. The food is mainly brought by suppliers to Spalding, where we package it up and send it to our customers.
From their first recipe (an Umbrian Wild Boar Ragu) to Matthews’ current favourite (“the Lamb Biryani – it takes less than 20 minutes, it’s delicious and it only uses one pot”) Gousto have expanded their offering to 22 recipes weekly, with seven-day delivery. Customers order boxes containing between two and four different ready-to-cook recipes.
Matthews says: “We deliver around 100,000 meals every week, reaching families all around the country. A lot of other tech companies are very London-centric in their market, but our customer base is genuinely broad.”
We’ve only just scratched the surface. There’s huge potential to grow over the next few years. We look at the spend in the UK on recipe boxes as against other more mature markets – or even the awareness of the proposition, which is still in the single digits – and see a huge opportunity.
Gousto’s Chief Financial Officer
With more than 200 employees and a compound annual growth rate of over 200% since launch, Gousto has raised £28 million of seed capital and venture funding. The latest investment round, in August 2016, brought in £10 million, including a £5 million revolving credit facility provided by Barclays.
How will Gousto be looking to use the new investment? Matthews says: “Our key focus is to make sure we’re building the best long-term customer proposition, so what we’re really focusing on is giving the customers maximum choice and maximum flexibility. To be able to do that, we have to be able to invest in factories, in data science in tech and in everything automated that supports our processes.”
CEO Timo Boldt says: “We are building capabilities to win this market for the long term. That's why we obsess about culture, talent and building long-term operational, tech and data advantage. The benefits will compound over time, and you’ll see massive innovation in the coming years.”
Despite the exponential increase in the recipe box market, and Gousto’s leading place in it, Boldt points to Gousto’s “very ambitious growth plans”.
Matthews adds: “We’ve only just scratched the surface. There’s huge potential to grow over the next few years. We look at the spend in the UK on recipe boxes as against other more mature markets – or even the awareness of the proposition, which is still in the single digits – and see a huge opportunity.”
“The two main challenges are building customer awareness and building the infrastructure to fulfil growing demand. A lot has to be done to develop the supply and technology networks that we rely on, and building these things requires investment, with that investment coming in part from Barclays. It allows us to make the right decisions for our customers, so we can invest in data science, for example, which will allow us to provide personalisation in the long term.”
“Gousto came to Barclays through our venture network,” says Sean Duffy, Head of Technology Media & Telecoms at Barclays Corporate Banking. “We met with Timo and had a number of conversations. We’ve provided the company with a £5 million revolving credit facility, under our venture debt product. It’s a product they can draw down and pay off as they wish according to their cashflow, so it can help them with working capital but also assist them with their growth.”
Boldt says that Gousto’s plans mean “we need the right funding partner at the right time,” allowing the company to “relentlessly work on our product to make this a mass market proposition.” He describes Barclays as a bank that can support the company’s rapid scaling, and stresses Gousto, with its fast growth, requires financial flexibility, saying Barclays’ product “gives us a buffer that means we can be more opportunistic.”
Matthews adds another factor in favour of the revolving credit facility: “For a fast-growing company like ours it gives us the opportunity to raise funds to support the growth of the business, and so get to a higher valuation before offering more equity. It reduces any expensive dilution in the investment process and it’s helpful to have a sensible balance between debt and equity.” Prior to the Barclays relationship, Matthews says, Gousto was 100% equity financed.
She sees potential for further benefits from Gousto’s relationship with Barclays, saying: “As an international and very well-networked organisation, Barclays are able to help us with introductions and contacts with other similar businesses. It’s been helpful from a networking perspective in the UK, and I’m sure that in the future, if we want to look internationally, it’ll be useful that Barclays has an international network.”
On a personal level, Matthews says: “I have a family, I work full time and so does my husband. We always used to eat the same five dishes again and again. Gousto has made our cooking and eating so much more exciting. What people want to do, I think, is to be able to cook from scratch. We’re letting them do that with more convenience and introducing an element of discovery.” In Lincolnshire, the Gousto team are boxing up the right ingredients for more Chicken Tinga Tacos, Turkish Beef Flatbreads and Sri Lankan Crab Curries to help those discoveries arrive.