Byte Kitchen to ride the digital kitchen wave with new funding

Byte Kitchen, a high tech restaurant startup, raised $6 million as it aims to bring food from independent restaurants to the masses through a single kitchen — its kitchen.

Why it matters: Startups with so-called ghost kitchens — professional cooking facilities designed with food deliveries in mind — have drawn increasing investor interest as a way to provide food service without the overhead costs of running a facility.

Driving the news: The seed raise, announced last week, was co-led by Crosslink Capital, Emergent Ventures and Lookout co-founder Kevin Mahaffey.

• Caviar co-founder Shawn Tsao and Black Bear Diner founder Bruce Dean were among the investors who participated.
• Also last week, Byte cut the ribbon for its second "digital food hall" in San Carlos, California (joining its first San Mateo location).

What's next: The company plans to use the funds to continue digitizing the back end of its kitchens, building its teams, and bringing on more restaurant partners, CEO Divyang Arora tells Kimberly.

• Byte will also open more food halls as well, expanding deeper into the Bay Area and California, and eventually across the country, he says.

How it works: The San Mateo company's storefronts, known as Noshery Food Halls, partner with several local restaurants and license their menus, recipes and brands.

• Byte cooks the food from its facilities using its own staff and equipment, as well as facilitates the food deliveries or pickup.
• Customers can select a mix of items from multiple restaurants within a single order from its food halls, for delivery or pickup.
• Byte's mission is to help independent restaurants scale their brands without the burden of bearing all the costs associated with adding new locations, Arora says.
• "It is truly an additional revenue stream," he adds. "There is no expenditure in terms of money or capital," for the local restaurants it works with.

State of play: Byte is one of a handful of ghost kitchen companies that have drawn investment dollars of late.

• San Francisco-based Local Kitchen raised $25 million last year, while Los Angeles-based Kitchen United snagged $100 million in a July Series C round.
• The space has also seen some lofty bets — see Miami-based Reef's $700 million capital raise in late 2020, and Los Angeles-based CloudKitchens, which raised about $850 million in a November funding round valuing the startup at $15 billion.

Yes, but: While the ghost kitchen industry generated about $52 billion in sales in 2021, not all operators are faring well. New York-based Butler folded last month after raising $50 million since it was founded in 2016, TechCrunch reported.