E-commerce startups built around food continue to gobble up funding as investors look for sticky consumer concepts that can scale without breaking the bank. On Wednesday, Germany’s Lanch — which taps social media and influencers to develop popular food brands alongside retail networks for distributing them — closed funding of €26 million ($27 million) to expand its business.
The Series A round is co-led by Felix and HV Capital. Lanch is not disclosing its valuation but we understand this is definitely an up-round. The startup has raised about $34 million to date (including this seed round in 2023) — so on normal Series A multiples, that likely puts it at between $100 million and $150 million.
In an interview, Nono Konopka — the CEO who co-founded the company with Dominic Kluge, Jonas Meynert and Kevin Kock — said the plan is to use the funding to continue expanding in Germany before moving to more markets.
So far Lanch has developed three brands: Loco Chicken and Happy Slice Pizza, as well its first packaged food, Happy Chips (potato chips).
Lanch will use the game-plan it has devised — mixing data it sources from social media and other online activity to figure out gaps in the market; plus tapping creators/influencers to launch and endorse the food products — to add to that list, too.
So far — and putting aside the fact that all of this is not particularly healthy — that formula has served the startup well. It said that since it launched commercially a year and a half ago, it has expanded to 350 ghost kitchens making its hot food — Loco Chicken being especially popular — which in turn are sold in a growing number of franchise stores, but primarily through food delivery platforms such as Lieferando and Walt.
Partnering up with personalities big in the German social media landscape, Lanch has also had a few viral wins to boost its profile. It sold some 30,000 pizzas in the space of a weekend when it launched Happy Slice with a pair of online comics called Knossi and Trymacs. When it launched its first physical Loco Chicken shop — having seeded the launch across TikTok and other platforms, of course — it shut down a neighborhood with crowds and the cops had to be called in, Knopka said.
“Half of the population in Germany knows our brands,” Konopka said. “We are really focused on now building the next Raising Cane’s or Chick-fil-A.”
He also said that the potato chips are now being sold in 10,000+ supermarkets, adding that it will be announcing another snack food alongside that soon.
Lanch’s rise underscores the emergence of a new class of startup (and tech company) that is leaning on the all-pervasive presence of social media, and the data that it brings with it, to build out new kinds of products.
Konopka said that he considers Lanch to be a technology company due to how it uses data.
“It’s incredibly hard to figure out where to open a restaurant, but we have 350 delivery locations [its ghost kitchens], and they give us a mind-blowing amount of data,” he said. “Data that tells us really specifically where it makes sense for us to open a physical restaurant. That is a massive advantage.”
That data also helps it identify what people like to eat to figure out what food product to work on developing next. On top of that there is the social-media aspect, working on partnerships with influencers and users to help promote their products, and using these attention-based platforms to understand what people are interested in eating — at a far cheaper cost than is involved in running physical trials, or big marketing campaigns.
Still, food-based tech startups have given the industry and investors a lot of indigestion over the years.
The market for fast-delivery startups and online grocery has wobbled and collapsed, wiping out hundreds of millions of dollars of investment. D2C food startups have also come and gone: they too raised hundreds of millions over the years, only to find — ultimately — a lot of issues with supply chains and finding product-market-fit (or just not working like they said they would).
One reason many D2C food startups never work out, Felix’s Frederic Court believes, is because they lean into costly marketing exercises that made for unprofitable unit economics. Lanch’s more efficient cost base has definitely been part of the attraction for investors, he said.