Dubai-based cloud kitchen company iKcon plans to raise more money to expand its operations across the Middle East as demand for online food delivery in the region continues to grow.
The company, founded in 2019 by Khalid Baareh and Kareem Abughazaleh, recently secured $5 million (Dh18.36m) in pre-Series A funding from Kuwait’s Arzan Venture Capital, family-owned Saudi companies Al Touq Group and Nazer Group, and others.
“We are preparing for our Series A funding round, which we target to conclude by December of this year,” chief executive Mr Baareh says.
He did not disclose how much iKcon intends to raise. The company has appointed Lumina Capital Advisers to advise on the fundraising.
“This will support our growth plans by allowing us to continue our UAE expansion plan, scale [up] our Saudi Arabia operations, hire the best talent across all disciplines and functions and, most importantly, continue investing heavily in our proprietary technological capabilities and solutions.”
The company was initially funded by a small group of friends before a seed round was raised last year, followed by the recent pre-Series A funding. It has secured more than $10m so far from investors across the GCC.
Cloud kitchens, or ghost kitchens, are commercial establishments that produce food specifically for delivery.
They do not have dine-in areas and consist of shared kitchen spaces with culinary specialists preparing food that is then delivered to customers at home or at work, typically through online delivery platforms such as Zomato, Deliveroo, Talabat, Uber Eats and others.
The concept has been gaining traction. Uber founder Travis Kalanick acquired US-based CloudKitchens in 2018 and has been buying competitors such as Foodstars, which is based in London, to grow the business.
“Covid-19 has re-emphasised the importance of food delivery and the convenience that it brings to businesses and consumers. Moreover, existing restaurant groups are seeing decreased dine-in demand because of Covid[-19] and higher dependency on delivery,” Mr Baareh says.
The company has 10 cloud kitchens in different locations in Dubai and Abu Dhabi, and it plans to open new cloud kitchens in Sharjah.
“We generate revenue from the consumer food orders through [several] sales channels such as delivery apps, directly through our customer service call centre and online platforms such as Instagram,” Mr Baareh says.
“We are also consistently innovating into new categories and will be announcing some exciting partnerships soon that create entirely new revenue streams for us.”
The company is partnering with a number of restaurants in Dubai to cook food and deliver it to their customers.
He said the UAE was still an under-penetrated market with opportunities for all cloud kitchen operators to grow.
“We welcome the competition and want to see our markets grow.”
Global brands in the food industry such as Jollibee are also entering the cloud-kitchen space.
The Philippines-based company opened its first cloud kitchen in Singapore last month.
Start-ups in the Middle East and North Africa secured $659m in funding in the first half of this year, an increase of 35 per cent from the previous year, according to data platform Magnitt.
The UAE received the largest share of funds raised while Egypt was ranked first in terms of the number of deals, accounting for 25 per cent of the region’s total.
“We are keen to continue expanding within the region and are fortunate to have highly engaged shareholders across the GCC and surrounding countries ... there will be more expansion announcements other than Saudi Arabia soon,” Mr Baareh says.
He did not divulge which other markets the company intends to expand to but said iKcon's “focus is on the Middle East and we are keen to launch our operations in other countries in the region”.
Mr Baareh, who holds a master's degree in Business Administration from the London School of Business, decided to start the company along with Mr Abughazaleh after seeing “significant acceleration” in the adoption of technology that helps to deliver food to customers through online channels.
“In mid-2018, we realised that the time was right for us to map out our cloud-kitchen vision with technology being at the core of our strategy and execution.”
Mr Baareh’s background was in consulting and private equity, which included experience with companies in the food and beverage space.
Mr Abughazaleh’s experience is in food operations and production.
He has founded and invested in several successful food-related companies.
“We launched iKcon with a vision to become the market leader in cloud kitchens in the region and to introduce modern and tech-advanced services to the food and beverage landscape. We are optimistic about our future growth.”
The company has 400 employees and intends to employ about 600 by the end of this year as demand for cloud kitchens grows across the region.
Other cloud-kitchen companies in the region have also been successful in raising money to fuel growth. Dubai-based Kitopi raised $60m in a Series B round in February and said the funds would allow it to add 100 more locations around the world by the end of this year.
Founded by Mohamad Ballout, Saman Darkan, Bader Ataya and Andres Arenas, Kitopi has more than 1,200 employees and has partnered with more than 100 restaurants such as Operation Falafel, Pizza Express and Right Bite.
Company profile
Name: iKcon
Founders: Khalid Baareh and Kareem Abughazaleh
Based: Dubai
Founded: 2019
Number of employees: 400
Sector: Food technology
Funding: $10m, including a recently closed pre-series A round of $5m led by Arzan Venture Capital, AlTouq Group and Nazer Group
Future plans: Looking to raise fresh capital and expand in Saudi Arabia
Q&A with Khalid Baareh, co-founder and chief executive of iKcon
What successful start-ups do you wish you could have started?
There are a number of start-ups that have made a huge impact on our daily lives including Uber, Careem, Amazon, Airbnb and Alibaba. Amazon changed the e-commerce business and Uber and Careem completely transformed the travel and logistics business.
What is your vision for the company?
To become the regional leader in the cloud kitchen space. We are looking to redesign the kitchen operations and food production business in the region using our know-how and technology. There are tremendous opportunities in this field.
Who are your clients in the region? How was your concept developed?
Our clients are well-established restaurants, chains and food entrepreneurs – many having an international presence – with unique ideas and concepts, who are looking to extend their reach while maintaining the same level of quality and consistency.
What is your mantra for success?
I always go by mindset and a positive, right frame of mind will lead to success. I am glad to be surrounded by exceptionally talented people who are helping us to scale our operations and grow our business. I wake up every day and it is a blessing to be doing what I am doing.
Where do you see yourself and iKcon in five years?
My focus is purely on building the next regional unicorn and I can’t imagine doing anything else. The next five years are important, transformational years for the food and beverage industry and we at iKcon are aiming to become the regional leader in operating cloud kitchens. We are focused on technology and operational excellence, which will be essential as the consumer will have an abundance of brands to choose from and is increasingly relying on technology to save time across several facets of their life.
How do you envision a post-Covid 19 world?
Consumer behaviour was already evolving rapidly over the past couple of years. I am convinced that the new consumer behaviour is here to stay, and the new market dynamic will become the norm.
