Millions of tonnes of food are thrown away each year, around a third by restaurants and retailers, and much of it perfectly edible. One social startup that was quick to spot an opportunity in the mounting problem of food waste has come up with a clever solution.
Based in Sweden and London, Karma, has developed an app that connects hungry Londoners and Swedes with top restaurants offering surplus meals, all sold at half price or less. It’s like Deliveroo but with a collection only service.
Launched in Sweden in 2016 Karma works with over 1,500 businesses, including restaurants, bakeries, hotels, and cafes, and three of Sweden’s biggest supermarket chains.
Following its launch in London in February this year the business has teamed up with over 400 restaurants in the city. There’s no subscription fee for their partners to pay and Karma estimates that restaurants can boost annual revenues by up to £30,000 ($38,000) from food that would otherwise have been thrown away.
Prior to starting Karma the company’s four founders, Elsa Bernadotte, Mattis Larsson, Ludvig Berling, and Hjalmar Ståhlberg Nordegren, had all been involved with other ventures.
“We had all graduated from university, the four of us got along really well and so we decided to build something new and exciting together,” says CEO Ståhlberg Nordegren. “We also knew that we wanted to build a consumer facing product that would make an impact.”
Initially Karma was launched as a platform for daily deals that were found and uploaded by users, similar to a crowdsourced version of Groupon. This worked well for a while, but as the platform became diluted it also became tricky to navigate and search.
The team decided to narrow their offering and focused on surplus food, a popular category already in the app. However the initial response from restaurants and retailers was disappointing, with very few even admitting to having food waste, and many taking the stance that food waste was not something that could easily be addressed.
Having spent time talking to restaurants and retailers the founders have a better understanding of how they view this problem and also how to position themselves to demonstrate that they can help them make a difference in tackling it.
The business attracted some early funding from Swedish angel investors, however the founders lived a typically frugal startup life without taking salaries. “After living like this for a couple of months our board of directors forced us to take on a salary of $2,000 per month to make sure we could really focus on the business,” says Ståhlberg Nordegren.
As their food waste model gathered momentum the Karma team looked for a second market to target and chose London, not least because it is the capital city of a country with a huge food waste problem, an estimated 10 million tonnes of it annually, at a cost of £17 billion ($22 billion). At the same time a growing movement towards sustainability in many areas of the UK food scene, driven by suppliers and consumers, coupled with high levels of digitalisation from both groups, made London an obvious choice.
Ståhlberg Nordegren explains: “While the demographics of users and suppliers in both cities are similar, there are some behavioural differences. Stockholm has a culture of lunch specials from restaurants, with a lot of Karma usage at 14:00. In London there is more of a ‘grab and go’ culture until the end of the working day, when demand rises.”
Today the business employs 35 people, with plans to recruit another 20, and is on track to report revenues of €3 million ($3.5 million) for 2018. A recent $12 million series A funding round, led by European venture fund Kinnevik brought the total amount raised by Karma to date to $18 million.
In some social enterprises there is a risk of conflict between pursuing a good cause and growing a profitable business. However, Ståhlberg Nordegren insists that the Karma team’s core belief is that you can’t make a massive impact without also building a sustainable business.
“We need to scale the business to be able to have the magnitude of impact that we’re aiming for,” he says. “Being able to make a profit from solving a problem while creating value for both restaurants and consumers makes this a fantastic opportunity to build a business where you don’t have to choose between cause or profits.”
With the latest injection of funding the Karma team is now focusing on three areas, expanding further in its established markets and into new markets, one market at a time.
“We are also planning to build the team to over 100 people over the next year, and of course add more features to the product,” says Ståhlberg Nordegren. “All in all we are on a mission to rescue even more food!”
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