Swedish startup Karma is looking to expand – yet again. It wasn't long ago that the company launched in the UK, which it did in February this year. Taking a look at the Karma job board, it’s not hard to guess where the company might be expanding next; it’s on the hunt for a general manager to launch its food waste app in France and Germany, fuelled by a $12m funding round in August.
For now though, most of the team are focused on growing customers, restaurant and supermarket partners in Sweden and the UK, and heading up the international expansion operations is Alex Spain, who joined the team in November 2017 from venture capital firm Atomico. He says there are some basic questions he asks when sizing up a new market:
How big is this market? How dense is it? What’s the consumer demographic? How much do consumers care about the kind of service we offer? How much do suppliers — or the government — care? Is there any regulation around what we’re working on? Are people talking about it?
How far away is this location from HQ? How easy is it to do business there? What language do people speak? Do consumers already use their phones for services like ours? Do both sides of the market already use digital tools?
Are there any other blockers?
The UK was a natural choice
For Karma the UK was a natural first step. Even before Spain joined the company (as its first non-Swedish speaking employee) or the company expanded to the UK, all of its meetings were held in English. In addition, its app and website was already available in Swedish and English, and there was plenty of conversation about food waste and sustainability in the British press.
Before committing to the UK, however, Spain tested out the theory. ‘I try to get as many different view points as possible; speaking to big retailers, going through my network to find famous chefs, operations directors of big chains, doing a lot of walk-ins [to restaurants]. The risk is that you just talk to one end of the spectrum, but you need to get a feel for all of them, because our supply base is broad.’
Selecting which area in the UK to launch
It’s not simply a matter of picking a country to move into; it’s also about working out where exactly in that country to launch, and who to partner with to do so.
‘When we launch in a new country, we actually launch in a dense area of a city, where there’s plenty of supply and demand,’ says Spain; plenty of supply from restaurants, sandwich shops and, ideally, supermarkets, willing to sell leftover food at a discount, and plenty of customers open to trying out a new app which lets them reserve half-price food to pick up from local stores. In the UK, that made central London — where there are grab-and-go food spots on every street — the obvious starting point.
Not all of the pieces of the jigsaw puzzle come together from the start, though. ‘We’ll initially launch with restaurants; they’re more independent than retailers — so we can get to them quicker — and more open to digital solutions,’ says Spain, who had around 50 sites on the platform for the London launch. The ‘sweet spot’ for Karma are restaurants with 5–15 sites: they have the ‘decision-making criteria of independents, with the scale of a mid-size chain’. In London, Karma found early champions in French restaurant group Aubaine, which has nine sites across the city, and the now-defunct cafe group Hummus Bros, which had six sites.
For an app like Karma, which sells leftover food, it’s also crucial to bring onboard some ‘premium’ partners for launch; ‘it’s important for branding to signal that we’re selling surplus that’s high quality.’ Then, once consumers are catching on, it’s about bringing onboard the big players — the supermarkets — to reach a much wider audience.
Current focus: improve the app
Somewhere down the line, says Spain, there are probably some interesting ways Karma can experiment with consumer psychology — perhaps experimenting with how items are priced, to convey quality, or sell faster. At the moment, however, the focus is on making the app as easy as possible for suppliers to use. Cafes and shops can change what discounts they offer, and alter pickup times. In the UK, suppliers also set VAT rates themselves (which vary between products) and are legally responsible for getting them right. It’s one less thing for Karma to comply with and, Spain insists, ‘small business owners are good at knowing how rates and regulation affect them’.
London’s restaurants are more digitally-savvy than most, which in some ways makes Karma an easier sell, but also means that it’s vying for attention with many other digital solutions. It helps that Karma is free for suppliers to sign up to, and its pitch is an attractive one: food businesses make more money from what they already sell, become more sustainable, and can attract new customers. In France, where retailers are fined for throwing away food, the financial incentive will be even stronger.
In markets where the conversation or regulation around food waste is less advanced, Spain says Karma has to make an assessment: ‘Is that the long-term view in that market, or could we educate them?’
Europe, Karma’s coming.