When Anupam Rastogi brought a cookie home for his middle school-aged daughter, he didn't just discover a tasty treat. He found what he considered a worthwhile startup investment.
The cookie came from Noshery, a "digital food hall" with locations in San Carlos and San Mateo that is operated by the startup Byte Kitchen Ltd. Founded last year by CEO Divyang Arora, chief technology officer Rahul Madad and chief operating officer Quinn McKenna, Byte Kitchen offers small restaurants a chance to expand without investing in additional restaurant space or staff.
That was interesting enough, but Rastogi's daughter gave him the ultimate thumbs-up. She said the cookie was the best she'd ever had.
"That was a very good validation, there, on the food," said Rastogi, a partner at Emergent Ventures.
On Tuesday, the company raised a $6 million seed round from Emergent, Crosslink Capital and other investors, including Edna Morris, former president of Red Lobster Hospitality LLC, and Bruce Dean, founder of family restaurant chain Black Bear Diner (legally known as BBDI LLC).
Byte Kitchen's aim is to provide small restaurants with a relatively easy way of offering their cuisine to more people, Arora said.
"Restaurants are the hearts of communities, and independent restaurants even more so," he said, continuing, "We wanted to start something that we knew would actually benefit the constituency that we're trying to serve."
Licensing local flavor
Byte Kitchen licenses recipes and operating procedures from its partner restaurants, paying them a franchise fee in exchange. Often, the restaurants the startup partners with have locations that are not close by and may not offer any delivery options to that locale.
For example, one of Byte Kitchen's franchise partners is Oren's Hummus, which has restaurant locations in Cupertino, Los Gatos, Mountain View, Palo Alto and San Francisco — but not in San Mateo.
"If you lived in San Mateo before we started Noshery, unless you physically drove to an Oren's Hummus location, that was the only way to get their food," Arora told the Business Journal. "But now you're getting the same exact food delivered, or you're picking it up from downtown San Mateo."
Customers can also eat inside Noshery's physical food halls, located at 5 South Ellsworth Ave. in San Mateo and 1754 Laurel St. in San Carlos. The San Mateo location was the startup's first, while the San Carlos location opened about four weeks ago, according to Arora.
Byte Kitchen replicates restaurants' most popular wares by sending staff to work in the restaurants' kitchens, record videos of the operations and create procedures that produce a dish with the same quality as the restaurants'," Arora said.
"No food goes out of our kitchen unless our restaurant partners sign off on it," he said.
The three restauranteurs
Arora said that he and his co-founders first started talking about forming a company in the restaurant space in 2020. The CEO met Madadi through a mutual friend, and the two brainstormed and talked to restaurant owners about ways that they could serve the industry.
"At that time the space of ghost kitchens had started to permeate the industry," Arora said, referring to the new kind of commercial kitchens that exclusively sell food via delivery. "And even in that model, yes, it's faster to set up, but restaurants still have to pay the rent, they have to staff the kitchens, they have to cook the ingredients. (They) are still doing all the work."
With Madadi's background in strategy and marketing, and Arora's resume in business management, the two needed a co-founder in restaurant experience. They explored "multiple channels," including LinkedIn, which Arora said felt like a long shot. Yet, through the career networking platform, they found McKenna, a former director of the California Restaurant Association and longtime operations head at a fine dining restaurant group.
The three co-founders enrolled in Y Combinator's accelerator program in the summer of last year. After graduating, they surveyed more restaurants and tested out a minimum viable product in the back kitchen of a yacht club on the Peninsula, with Arora, Madadi and McKenna themselves preparing the meals.
"We went to Bi-Rite and got the utensils, and started doing that, and we showed a few chef partners," Arora said. The three co-founders wanted to know, "could we even have an operating set of procedures that allowed us to do this at a repeatable quality, over and over again?"
Running this "test kitchen" out of the yacht club for a few months allowed Arora and his co-founders to raise a small amount of capital from their personal network, which enabled them to lease their first kitchen in San Mateo, he said. Tuesday marks the one-year anniversary of Byte Kitchen's first restaurant hire.
Prior to his firm's investment in Byte Kitchen, Rastogi and a few other Emergent Ventures personnel conducted interviews of restaurant owners to see what they thought about Byte Kitchens' business model. The restaurant owners gave them positive feedback, he said.
In addition, Byte Kitchen's founders exhibited traits that Rastogi considers essential to a successful startup.
"In entrepreneurs, we're always looking for resilience, creativity, the ability to work around little problems. Which, in a business like this, is a little bit more than a regular software business," he said. "There were a lot of good signs on all of those fronts."
