Unicorn alert: Daniel Khachab tells us how Choco hit a $1.2bn valuation
Hi Daniel! Tell us about Choco
Choco is an ordering platform connecting restaurants and food suppliers via an app. Our vision is to reduce food waste on a global scale by digitising the food industry towards a more sustainable future. By digitally streamlining the global food supply chain, we have created a more efficient process that empowers restaurants and suppliers to make every possible financial and process efficiency, improving margins and strengthening the hospitality business.
What made you think there was money in this?
The idea was triggered when I realised how much food waste was generated in the global supply chain. For context, 40% of food produced goes to waste each year and nearly three-quarters of that waste happens in the supply chain before consumers are involved. Waste is the third-largest driver of climate change. If food waste were a country, it would be the third largest in carbon dioxide emissions on the planet.
The question facing us was: how can we build a business to help solve this problem? It was tough to think about the production aspect of the still hypothetical business. So, a friend of mine, who started a consumer business for restaurants in Singapore, suggested I come over to help him out and conduct research at the same time.
At one point, my job was to run from restaurant to restaurant and take photos of the food. While doing this, I saw how restaurants order their ingredients. They would usually do a phone call and say: "Hello, this is restaurant ABC. My name is Daniel, client number 123, and I want five cucumbers, 20 lemons, 5lbs of beef, and 2lbs of tomatoes."
Then they would hang up and go through the same process 15 times because they would have up to 15 different suppliers. And I was like, this process, in the digital age, is just crazy and inefficient. The restaurant leaves a voicemail, and on the other side, the supplier must listen to hours and hours of voicemail every day at 3:00am before the delivery trucks leave. Then once the food arrived, wrong products or incorrect amounts were delivered as there would be errors transcribing the messages manually – all leading to waste. I could really understand then that the market was ready.
It took us over 14 months of just pure research on the intricacies of the food supply chain. And at the end of this intensive brainstorming period I knew we could address this. I then made it my mission to solve these food supply chain inefficiencies with an app. That was how Choco was born.
How tough was it to raise funding in five rounds?
It becomes easier round by round. The first round is the hardest as you have no evidence that your plan can work. You need to convince early investors with a big vision and a strong and committed team. You need to truly care about the problem you want to solve and have developed great background knowledge of it. Investors understand if you are genuine.
Then you need to focus on one thing only: going live, bringing your product to market, and showing traction. Any round after the first one will be raised on traction, so it is less about the act of fundraising itself, it is more about making sure the company actually delivers on its promise.
Over three and a half years we’ve raised eight rounds equating to $274.7m and giving us a valuation of $1.2bn, making us a unicorn. The company has grown rapidly and is active in markets such as the US, Germany, France, Spain, Austria, Belgium and most recently the UK.
What's Choco's biggest strength?
Choco is simple. We go very deep to understand how we can re-create complex processes and simplify them into our product for our users. Anyone can build an interface, but it is really hard to create value while staying simple.
What is the secret to making Choco work?
It's our team and our culture. We have expanded into six countries across two continents within the first nine months of our existence. That is with a premature product and early processes. But we made it work by always doing what is best for Choco, by hard-work and having fun building our company.
How do you market the company?
Choco is a company in which every unit of economic success directly correlates with a unit of success for the planet and society. This is my drive, passion and life mission to make it work.
We must remain committed to the cause and back our value proposition with real life examples on the benefits we’re already having to the supply chain. Once the suppliers understand the story and the operational efficiencies it’s had on businesses globally, then this feeds the demand to use the app and the restaurants follow. Advocacy is also key and who else can tell your story better than your customers?
Tell us about the business model
Choco’s offering optimises mostly three things. Increase sales by displaying products digitally and targeted marketing to customers; reduce costs by order streamlining and automation via integrations; and fully digitise by onboarding all of the customers to the order management platform.
For suppliers that want to start the digitalisation journey step by step, they can for a small fee get listed and create a profile so that existing customers can find and start ordering from them. As we want to be an open platform, we offer our basic order transmission to all restaurants for free.
We accompany restaurants as much as suppliers at every step of the way on their personal digitalisation journey. We believe those that will win will digitise and optimise their operations end-to-end.
We're convinced that the entire industry will go digital by 2026.
What were you doing before?
I worked at Rocket Internet before, building companies across all major consumer verticals on five continents. I learned how to start and scale a business.
For Choco we were looking for large and meaningful problems. And it was the widespread issue of food waste.
I also realised how fascinating the food industry is — it's global, diverse, it affects every human. Also, I love the spirit of this industry because of perishability, decisions are made fast. The people that work in it are real, upfront and fun. I felt like this is what I want to spend my life on. And when my co founders and I realised that this could be the strategy to kickstart a company that could help alleviate the global food waste problem, we said: “let's build an application for B2B food ordering, as the first step to creating something way larger.”
Are there any technologies you've found useful?
I personally love the Superhuman email app as it increases productivity.
Not many European tech companies have cracked the US. Why is this, and why is Choco so successful there?
The US is significantly more competitive in any aspect. Services are more expensive, competition is better funded, and talent is harder to convince to join you. To win the US it must be a company priority. Yet one should start fast and nimble, as opposed to making large plans. Just go there and set up shop. Be close to the market, learn everyday and iterate fast on your mistakes.
What is the future vision?
To enable the whole food system, from restaurants to suppliers, distributors down to farmers, to operate waste-free, sustainably and resiliently, by connecting them.