The COVID-19 pandemic has impacted business in different ways, with founders pivoting to adapt and survive in an ever-changing environment.
In our Business as Unusual series, we’ve been speaking to companies supported by Virgin StartUp to explore the impact of coronavirus on small businesses and entrepreneurs.
Karma Cans is a catering business that creates and delivers up to 600 nutritious meals a day for businesses across London. During the pandemic, they saw demand fall significantly as offices closed. Co-founder Ecci Newton spoke to us about pivoting the business and fundraising in the middle of a pandemic.
Why did you start Karma Cans?
I started Karma Cans with my sister Gini because – the honest answer – we needed to make some money. We were delivering lunches to people's offices and that was going pretty well. I was still at university when we started, but I stopped my exams because I couldn't manage all of it at the same time.
After I finished my exams, my friends were all applying for jobs and I was too, but on the side I was doing private cheffing to make some money. Gini and I had conversations about whether I should keep doing it, but eventually, the other options faded away.
It was a very slow start, and I've seen this when people don’t have a business plan or funding. Yes, the start is slow, but you build the foundations gently and when you're ready, you can start growing the business. That's what happened with Karma Cans.
We got the Virgin StartUp loan, and that helped us to get our own kitchen space and hire our first member of the team, who is still with us today. It was all very small and slow at first, and it took two years to get the whole thing properly working as a business.
How much has the business grown?
Since we took on our first member of the team, we have grown a lot. This year we probably would have grown around 40%, last year we grew 36%, and the year before we grew 50%. So it's really strong year-on-year growth in our marketplace.
We've been doing really well in terms of revenue numbers. The overall picture was looking super positive before coronavirus hit.
How did the pandemic affect your business?
This was going to be our best year yet. At the beginning of the year, we were hoping to hit £1.2 million in revenue this year. We were doing close to £100,000 a month, which was a big deal for us. Starting a business without any debt or funding, everything takes 10 times as long. You're thinking, should I spend £300 on flyers for the business or £300 on a Magimix that we need to make the food? Those decisions that you're making, they slow you down so much. So by the time we got to this point we were so happy, we were finally really doing well.
Coronavirus took our numbers from a thousand orders a day to maybe one or two orders a day within a week. It absolutely decimated the business.
We got a contract with loads of people doing NHS catering for free, so during lockdown we were doing 1,000 meals a day just for the NHS. Then that stopped, so we had to think about what we were going to do next. We tried to get other public sector contracts, and we were talking to lots of different people. We had to reassess what the business could be used for.
One of the things we thought about doing was starting a restaurant, and doing a summer pop-up. We gave it a go and opened our rooftop barbecue series about six weeks ago and it's been amazing. We've had great feedback and a lot of the doctors and nurses who had used the NHS catering have visited us at the restaurant. It's a really good turnaround, and the restaurant is going to run until the end of September.
It's been an interesting time. In some ways it's been sad because of how great we thought 2020 was going to be. We have such a great team and we're really glad we've managed to keep them all together, working on different things. But it's shown us that if you give your team the opportunity they will pull out all the stops and do the most incredible work.
You also run another company, how has that been affected by COVID-19?
A couple of years ago we also started another company, Karma Kitchen. It’s run in parallel with Karma Cans and that's where we've been building dark kitchens for catering, food and drink. We have sites in Hackney and Wood Green, and we're looking at more UK sites, and looking to move into Europe by the end of next year. We needed quite a bit of capital to do that; we recently received a quarter of a billion pounds in funding to build more dark kitchens.
The deal that we'd been working on fell apart at the beginning of the coronavirus pandemic because the original investors were a big private equity company that couldn't close their fund. It happened just two days before we were supposed to sign the paperwork and complete the deal. It was pretty shocking.
I had to take the deal back out to market in the height of the pandemic, and managed to get three more offers on the table within four weeks. We closed with the person that could move the fastest five weeks later.
Everything was being done over Zoom and I was ill with coronavirus while it was happening. I was so tired, but actually it's worked out really well. The people we're working with now are such a good partner for us, they specialise in industrial real estate so it's a perfect fit and it's been a really good experience overall. We've put in some offers on sites now and we're excited to start taking the next steps.
How do you think this year is going to change what business looks like in the future?
I can't tell you what the future is going to look like, but it's encouraged us to diversify our revenue streams – I can't believe that we didn't do that sooner. We were so locked into corporate catering, we did a good job for the clients that we had, but our clients were all the same kind of client. Diverse and redundant parts of your business can often be the most fruitful in times of crisis because they can really pick up.
Karma Kitchen has many types of clients. We serve all kinds of food businesses: corporate catering, delivery businesses, product manufacturers, a whole range of different businesses. It's the one thing that people were pushing back on when we were fundraising, they wanted us to just focus on delivery. But we're here for start-ups, and for massive, multi-nationals – we want to serve every kind of business.
During lockdown, that served us in good stead, because we were able to rebalance the portfolio of clients that we had towards delivery. At the same time, we knew that we had corporate caters and events companies that would come back next year because we were stable.
Karma Cans suffered because we only serve one kind of customer - we do events and corporate catering. It pushed us to really think. We said to the team “no idea was a bad idea”, and we wanted to try a little bit of everything to keep the business going.
We went into coronavirus in a good situation because we didn't have any debt and we were making a profit. When we needed to get a loan we were the perfect applicants! We focused on maintaining our position and looking after all the people in our team.
I think the most important thing is to survive the next six to eight months, and make sure we don't lose any members of our team so that as corporate catering starts to picks up again we're making enough money to cover our fundamentals. We can then come into next summer with the same team, and maybe grow it a little to support the new strands of the business.
I can't say what will happen in the future, but we're starting to see some corporate catering returning now and some events are coming back. The restaurant’s doing well and we want to move to a permanent location and split that part of the business off completely.
We don't know what the future holds, it could be anything!
Article reproduced from Virgin.com