Timo Boldt kitchen-gousto

Gousto founder and CEO Timo Boldt

Meal-kit delivery operator Gousto has secured £28.5m in new funding, bringing the total raised by the company to £56.5m.

The new funding came from three existing investors - Angel CoFund, MMC Ventures and BGF Ventures - and a new one, investment management firm Hargreave Hale, Gousto announced this morning.

Gousto founder and CEO Timo Boldt would not reveal how the investment was split between the companies. He also wouldn’t divulge the stake it secured or valuation it placed on Gousto.

He said the investment would be used to develop artificial intelligence capabilities, used to keep food waste down to 1% by organising stock and to create a personalised website, “so that you see a different menu than I see”.

Founded in 2012, Gousto made operating losses of £6.6m for the year ending 30 December 2016, latest full accounts posted with Companies House show.

Boldt said revenues had increased by nearly 100% in 2017 but that the company’s focus remained growth through customer acquisition rather than short-term profit.

“We’re not disclosing profitability but at this stage all I care about is profitable growth, which means that every single customer we acquire is adding a very positive contribution to the business,” he said.

“Profitability is a choice,” he added. “I can show you a big profit today. I just need to turn off some investment and marketing activity and then I’m deeply profitable.

“We are very close to profitability but it’s just not the number one focus. What’s harder is to be 10 times the size we are today and then make it profitable. That’s the avenue.

“I think realistically in the next 12 to 18 months we will potentially allow for some profitability but we will aggressively reinvest any profit. My core belief is this opportunity is so large you would leave massive value on the table if you had a profit [at this stage]. You need to reinvest that and build capabilities.”

He added: “Do you want to have a small business with a high margin, or can you actually build a household brand people across the UK love and that can last for decades? In that case you really have to raise some funding and invest big time.”

Around a billion meals are eaten a day in the UK, 70% of which are cooked in the home, representing an enormous long-term opportunity for Gousto, Boldt said.

“One per cent of this would mean we build a £5-£6bn revenue business,” he said. “And 0.01% means we’re building a £600m business.

“For 50 years, supermarkets have built stores across the country. For the next 50 years that supply chain is no longer fit for purpose. You want to order food on the bus, on the go.”

On the valuation placed on Gousto by the new investment, he said: “What’s fair to say is the company has grown massively. We’re growing at 100% to 200% this year alone. Within five years we jumped to 371 employees. And obviously the valuation is accordingly high, reflecting the huge opportunity we have in this market and the traction we’re seeing.

“We managed to build by far the best-value proposition. I want to win this market in the UK. That’s the objective. And it looks like we’re on track.”

The biggest stakeholder in the company was management, “including myself, obviously,” Boldt said. Shares are also owned by 160 employees, he added.

“I passionately believe in building an ownership culture and one of the mechanisms is to actually give people shares in the business, including people who work in the factory, work in our customer care team.”

He said Gousto had expanded its range to offer “by far the most choice,” adding: “We have 29 meals to choose from on a weekly basis.”

He said building AI capabilities would “make the value proposition better and better”.

As well as working to reach a lower-still rate of food waste, the company was trialling ways to use less plastic packaging and improve on the 12% which is currently non-recyclable, he said.

A statement from Gousto on the investment said: “UK-leading meal-kit company, Gousto, has raised a further £28.5m additional equity funding from new and existing investors: Hargreave Hale, Angel CoFund, MMC Ventures, and BGF Ventures - bringing the total amount raised to £56.5m.

“The investment shows enormous progress for the company, a first-mover in the highly competitive and fast-growing meal-kit industry, which is predicted to generate $10bn[1] globally by 2020 and is already worth an estimated $3.5bn in the US.

“Accelerating its proposition via automation, with limited cost and logistical challenges, Gousto is transforming the way families eat at home across the country. Prioritising product investment to ensure continued growth, by 2025 Gousto will help UK families serve 400 million nutritious home-cooked meals and extend its 0% household food waste to three million more homes.”

Boldt said: “Our commitment to technology has seen us create a leading value proposition, driving customer satisfaction levels 56 percentage points higher than the UK’s leading supermarket. Over the next year, we’ll win even more of the one billion meals eaten in the UK, by prioritising investment in AI and automation to ‘wow’ customers.

“New funding allows us to continue transforming the grocery market and supporting the British economy with the creation of new jobs, with our headcount expected to increase two-fold over the next few years.”

Oliver Bedford, co-manager of the Hargreave Hale AIM VCTs, said: “It was clear from our first meeting that the management of Gousto have brought leadership and innovation to a mature industry that will have a lasting impact on the way we purchase and consume food at home.

“We are particularly impressed by their progress in a short period of time and excited about their plans for further service enhancements that will continue to improve the consumer experience.”