Saltalk, a virtual kitchen and e-commerce platform that connects food entrepreneurs and customers, will continue to seek Series B funding worth $30 million by early next year, the firm’s founder and CEO Fred Ming told Pandaily in a recent interview.
The news comes amid an economic downturn that saw total global venture funding in May 2022 drop to $39 billion, marking the first month in more than a year in which the figure fell below $40 billion, Crunchbase data shows.
The proceeds of the upcoming round will be used to fund virtual kitchen development and team expansion, Ming said. A virtual kitchen, also known as a ghost kitchen, is a professional food preparation and cooking facility set up for delivery-only meals.
The Santa Clara-based company has a pre-money valuation of $30 million and monthly revenue of over $200,000, according to the CEO. The company has recently closed a Series A financing round worth $8 million, proceeds from which will be used to fund virtual kitchen development, sales and marketing, as well as engineering and operations. Los Altos-based tech investor Foothill Ventures, San Francisco-based food tech company GrubMarket, and Fremont-based early-stage venture fund Celtic House Asia Partners were among the investors in this round.
Ming got the idea for Saltalk in 2017, a few years after relocating to Silicon Valley with his family. One day, he and his wife went out to dinner at a local Chinese restaurant, and a stir-fried pork dish brought tears to her eyes. She was homesick.
“I wanted to build a platform that encourages excellent chefs, bakers, and cooking enthusiasts, from everywhere in the world, to come and cook their most authentic meals for people away from their hometown,” Ming told his story to Pandaily.
Prior to starting his own business, Ming worked as a software architect at Telenav [NASDAQ: TNAV], a location-based services provider in Santa Clara. He earned a bachelor’s degree in computer science from Shanghai’s Fudan University in 2005, according to LinkedIn.
Saltalk currently has a team of under 50 employees working across three main divisions: tech, sales, and client services/customer success.
Saltalk’s core business has two parts. First, it offers a SaaS platform with built-in analytics tools for chefs to manage their orders and keep track of their revenue. Second, it runs a delivery portal (similar to DoorDash and Chowbus) for enterprise customers to order food and manage their budgets. Also integrated into the system is an admin console for the operations team to manage logistics, route assignments, and local partners, according to a pitchbook shared with Pandaily by Saltalk.
The company currently operates an 8,000-square-foot virtual kitchen in Santa Clara in which 10 chefs churn out over 200 dishes for 100 enterprise customers, which include big names like Alibaba, Midea, JD.com, and Honda. Ming said most of the dishes are updated periodically in order to meet the needs and preferences of the clients, adding that Saltalk is planning on building two more 15,000-square-foot virtual kitchens in the Bay Area by the end of 2024 to serve more catering brands.
Virtual kitchens have a higher-than-average profit margin as they do not incur costs associated with dine-in facilities. The price advantage means that chefs who choose to work with Saltalk can commit less upfront capital. It also means they can launch their businesses and break even faster. According to the pitchbook, the new business model allows chefs to make a profit in 12 weeks, which is 75% more efficient than if they were to open a restaurant by themselves.
The company’s unique value proposition also ensures a better user experience for enterprise customers, meaning that they can enjoy lower prices, better food quality, and a greater variety of options, among other things.
“We don’t charge any delivery fee because delivery only accounts for about 5% of our total costs. This is possible because we have an algorithm-based route planning system that allows our drivers to deliver five to six orders per hour, compared with the industry average of two to three orders per hour,” Ming told Pandaily.
In the future, the company hopes to leverage its technical expertise to develop a better food recommendation system. “Our key difference from other food delivery platforms, which is also our unique selling proposition, is that we can recommend the right dishes to our customers based on what we know about them, such as their spending habits, their dietary restrictions, whether they have more Chinese or Indian employees, things like that,” Ming said, “The goal in the near term is to be able to show our customers their favorite dishes without making them do a lot of scrolling.”
When asked if the ongoing pandemic took a toll on his business, Ming’s answer was a resounding yes. He told Pandaily that Saltalk’s first virtual kitchen was scheduled to kick into gear in November 2019, but the COVID-19 outbreak disrupted his plan for the entire year of 2020.
“Then, in April 2021, we lost our entire B2B business because people were ordered to work from home. Enterprise customers accounted for 80% of our total revenue, and all of that was gone, just like that” he said.
The CEO ended up laying off some of his employees and pivoting into B2C. “Soon, we were making over $100,000 a month, which was not bad, especially volume-wise, but we were not making a profit. We needed to keep the team together. We needed to make sure that people get paid. So, we hired some more chefs and pivoted back to B2B, and finally, in September 2021, things started to get better,” he said.
When asked about his thoughts on the recent market downturn, and his startup’s prospect of raising more funds as planned, the CEO answered with a smile: “I believe in the conservation law of energy. When God closes a door, he opens a window for you. We’ve been through a lot in the last two years, but we came out stronger and more resilient. While there might be greater challenges lying ahead, I’m confident that we will survive, and we will do better.”