Salima Vellani was pretty good at landing cash.
In 2019, after years of investing in and setting up food and beverage brands internationally, she founded dark-kitchen startup Kbox from London.
It seemed like a good idea. As food delivery boomed, ancillary investor interest in ghost or dark kitchens was up. That same year, Saudi Arabia’s sovereign wealth fund would funnel $600 million into CloudKitchens, the dark-kitchen startup set up by Uber founder Travis Kalanick.
The pandemic would cement investor enthusiasm in the sector. And as a former Kbox employee said, Vellani was “amazing at raising money.”
She tapped up investors twice in three months in 2020, pulling in £17 million (around $20.7 million) from Revolut-backer Balderton Capital and Darktrace investor Hoxton Ventures.
“The first two rounds were some of the easiest money I’ve ever raised,” Vellani told Insider. “I had the pick of who I wanted to invest, and it only took two weeks, money was pretty easy to come by during COVID-19.”
But two years after this funding, large for an early-stage European startup, Vellani exited the business suddenly, citing health issues. Fast forward to September this year, and the remaining company has slumped into administration, approximately equivalent to Chapter 11 bankruptcy in the US, with its 18 staff made redundant. London-based Interpath, appointed joint administrators, is now exploring sale options for what remains of the business.
Kbox’s collapse and fire sale is an increasingly common cautionary tale of a pandemic-era boom followed by a low-interest-rate bust, particularly in the delivery sector. Kbox’s peers including Butler shuttered in 2022, Reef Technologies shut hundreds of locations, and CloudKitchens laid off staff last year.
Insider spoke to Vellani as well as former Kbox employees and investors. Those who worked with Vellani raised questions about her ability to manage and grow a startup, pointed to a lack of technological know-how, and spoke to the difficulties of attaining quality at a startup’s usual breakneck speed. These sources spoke on condition of anonymity for fear of jeopardizing investment or future employment opportunities. Their identities are known to Insider.
Balderton Capital declined to comment for this article. Hoxton Ventures declined to comment on the record.
Kbox was like an amped-up Airbnb for kitchens
Most dark kitchens are shed-like spaces located in car parks or other unprepossessing spaces. Kbox operated differently, offering what amounted to a software toolkit and access to menus from trendy “virtual brands” to help pubs and hotels train their chefs to do food delivery during off-peak hours.
These virtual brands included MrBeast Burger, the delivery-only brand founded by YouTuber MrBeast, aka Jimmy Donaldson.
Another was fried chicken brand Absurd Bird, a Kbox subsidiary.
In theory, it was a smart setup. Kbox didn’t have to operate any kitchens or employ chefs itself. It targeted venues that sold food but weren’t typically on food-delivery apps, such as bingo halls, which suffered during the pandemic. Vellani cut her startup teeth at a similar company, Lean Kitchen Network, quitting a few months before founding Kbox.
But execution was harder than it looked. Kbox needed to do all of the following: Make sure the virtual brand food items were both appealing and easy to cook; build a strong sales team; ensure consistent food quality (or risk bad reviews); and market its virtual brands well on food apps.
“Get any one piece wrong and the whole thing falls apart,” one person involved with Kbox said.
Pieces did go wrong.
“We can have these amazing poke bowls from underused places which helps suffering pubs or hotel make some revenues but it’s hard to keep up the food quality,” said another person. “You’re only judged on food quality, but if the chef is doing 10 times the work for same money, then it’s a fundamental problem.”
Both Uber Eats and Deliveroo, after an initial burst of interest, would eventually go on to cut back on virtual brands. One reason was quality control — with MrBeast complaining on X that he “couldn’t guarantee” the quality of his brand.
Kbox also struggled with low margins common in the sector, labor shortages exacerbated by Brexit, and competition, Vellani and others said.
Two former employees said Vellani didn’t have the technical know-how to build out what was, ultimately, a software platform. They also described the running of Kbox as “like a dictatorship.”
In an attempt to provide more operational expertise, Vellani brought in her brother, Karim Vellani, a move that was approved by the board. Karim eventually took on the role of interim chief operating officer.
In an email comment, Vellani acknowledged her lack of direct technical experience but said she sought to fix this through other C-suite hires. She disputed the former employees’ characterization of her management, saying that “everyone had a voice.” She added that some people found it hard to take direction from a woman.
A proposed exit fell through
In the summer of 2022, Vellani sought to sell or merge her startup with a business based in the Middle East, in the hope of achieving a cash injection and scale. Vellani and the company’s investors declined to comment on specifics, but the deal was not accepted by the Kbox board.
Vellani said she resigned from the business around this time, citing health issues.
She was replaced by Sydney-based Ben Schultz who served as CEO until administrators took over the company earlier in October.
Kbox continued to operate following Vellani’s departure but, as one person close to the company said, the “writing was on the wall.” Another described the end of Kbox as a “slow-motion train wreck.”
With runway depleting and costs spiraling, Kbox attempted to re-capitalize the business with cash from existing investors and angels, while simultaneously exploring options to sell itself in recent weeks, according to one source familiar with proceedings.
One prospective acquirer was Kitchen United, a US operator that raised $80 million in funding last year, a source familiar with proceedings said. Kitchen United did not respond to a request for comment when contacted by Insider.
Despite the last-minute attempts to raise capital, Kbox was forced into administration on October 11.
“This is a challenging time for many dark kitchen operators, as cost inflation continues to impact margins,” Nick Holloway, managing director at Interpath Advisory and joint administrator, said. “We will now be exploring the rapid sale of both the brands and platform, and would ask that any interested parties make contact with us at the earliest opportunity.”
Kbox’s future is now uncertain. One of the sources close to proceedings was optimistic a prospective buyer could emerge this week.
“I questioned whether I’m the right person for this, maybe you need a 27-year-old male,” Vellani, now 54, said. “I’ve always been conservative in how I run a business and wanted to focus on sustainability but it was always grow, grow, grow from investors.”
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