Karma Kitchen is WeWork for dark kitchens

Karma Kitchen has raised £252 million in series A for building a business for shared and private commercial kitchen spaces to rent. Yes, two hundred, not a typo. 

There are not too many public details available except for a paywalled article* and one with a rather general spiel, raising more questions than providing answers. 

Karma buys spaces and sets them up as cooking facilities, renting out portions of them to teams of cooks not interested in setting up restaurants on their own premises. A backend operation, very asset heavy, including buying the real estate, so that the huge valuation makes sense. It looks like WeWork for dark kitchens, at a similar scale, and we all know how that ended. 

Many risks to mitigate on both sides of the market and not clear what part of the chain Karma innovates. The real estate investor backing the deal will get the physical spaces against the financial risk in the worse case scenario with the upside of trying a new rental model on top of real estate. And so Karma is a vertical real estate startup with a different GTM**, more complicated than WeWork but as risky. 

Demand side is maybe higher (#restos > #tech startups?) but there is radical behavior change involved - costly and time consuming. The covid context is a rather favorable conjecture, it’s difficult to imagine the biz at scale in Europe though, also given the huge cultural food fragmentation, city regulations etc (London is different than Madrid or Stockholm or Bucharest). 

But there’s something there, the due diligence was done and risk has been taken. To paraphrase a movie quote, it is either an incredibly risky or an incredibly smart idea. :-) 

* I will never understand how startups do PR to get earned media behind paywalled media, but that’s for another time.
** Arguably, it is similar to Travis Kalanick’s CloudKitchens - but the US market is very different and CK’s secret sauce is innovating a completely integrated tech-based backend, for which you need vision.

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