Forget about your supermarket and buy directly from your local farmers and foodmakers. French startup La Ruche qui dit oui (also known as The Food Assembly in the U.K.) has been making waves in its home country for a while now. But it seems like international investors also got the word as Fred Wilson from Union Square Ventures and Frédéric Court from Felix Capital are leading a $9 million Series B round (€8 million) in the food startup, with XAnge and Quadia also participating. This startup is fascinating for many reasons — La Ruche may have found the most efficient business model when it comes to building a food startup.
“Last year, we launched in the U.K., Germany, Spain and Italy. This round means that we need to solidify our existing markets,” co-founder and CEO Marc-David Choukroun told me. “We need to go faster when it comes to our innovation power.”
Here’s how La Ruche works. There are hundreds of ruches in many different places in France. You first need to find your local “ruche” on the company’s website and sign up to the newsletter. Every week, the ruche manager will send you an email and tell you what you can buy this week. Local foodmakers then come and sell directly their goods to the end consumers in your city. It’s a great way to talk with your neighbors and local farmers.
And this is key to understanding La Ruche’s early success. The company only provides a marketplace, which is a major advantage for everyone. First, local farmers get over 80 percent for every product sold, which is around four times better than what they could get from a supermarket chain. Similarly, these foodmakers set their own prices, meaning that it doesn’t need to be a race to the bottom anymore. At the same time, because they keep most of the proceedings of a purchase, they can set competitive prices as well.
We only need 3 or 4 people to manage a network of 100 to 200 ruches Marc-David Choukroun
Second, La Ruche doesn’t manage directly these local communities. Ruche managers are independent contractors who probably already know their way around local food and want to take advantage of the startup’s platform. These managers get an 8.35 percent cut on every transaction, and, according to an internal survey, 40 percent of them would like to work on their ruches full time.
Finally, La Ruche sits happily in this service provider position, providing the technology, brand and network to help local farmers get a fairer price and provide healthy food to more people. The company keeps an 8.35 cut as well.
Overall, only 70 people are working for La Ruche, with 15 people working on product design and development right now. “We only need 3 or 4 people to manage a network of 100 to 200 ruches,” Choukroun said. When you look at all the 600 ruches available in France, you can’t help but think that this model is ultra scalable.
When it comes to today’s fundraising news, I was quite surprised to learn that a startup that mostly operates in its home market could convince international investors. “Competition in this industry is international. We were lucky to be one of the first companies in this area,” Choukroun said. “And that’s why we wanted to work with international investors. For example, we like USV because they worked with Etsy, Kickstarter, Tumblr and many other community-focused platforms.”
Frédéric Court from the new VC firm Felix Capital and Cyril Bertrand from XAnge are joining the board. Fred Wilson is going to be a board observer. Rodolphe Menegaux who recently left XAnge for Alven Capital is becoming a board observer as well.
“I have been following this company for a while,” Frédéric Court told me in a phone interview. “And this is a beautiful example of what we’re trying to do with our investment thesis. We invest in companies that build on top of the European heritage and lifestyle — fashion, food, cuisine…”
The true beauty behind La Ruche is that it’s all about recurring transactions Frédéric Court
I then asked him about the business potential of La Ruche as Felix Capital is a VC firm first and foremost. “The true beauty behind La Ruche is that it’s all about recurring transactions,” he said. “In fashion, people don’t buy stuff every month. But the lifetime value of a La Ruche customer can be very high. There are a few areas like this one, transportation and food for example.”
La Ruche is also USV’s first investment in a French startup. Fred Wilson comes to Europe around four times a year as he has boards in a few major European cities. Last December, he was in Paris with his wife and met Choukroun. “We went to a ruche on a Saturday morning, we had coffee, watched people come by. To me, that was the moment when I realized that they were doing something different, unique — something that nobody in the U.S. has done, at least successfully,” Fred Wilson told me in a phone interview.
When I asked whether USV had been looking to invest in a food startup as many have been very successful in the past couple of years (Postmates, Instacart, Blue Apron…), his answer was very straightforward. “We’ve been wanting to invest in a food startup. But the specific sector of food that we’ve been interested in is farmers to families, and how do you make that work,” he said. “We’ve probably met with 30 or 40 companies in this sector all over the U.S., Europe, Canada — lots of places. We always want to invest in companies that are communities first and foremost — Etsy and Kickstarter are classic examples of that.”
We’ve probably met with 30 or 40 companies in this sector all over the U.S., Europe, Canada — lots of places Fred Wilson
While La Ruche is only focused on a few European countries for now, USV doesn’t plan to pressure the company to expand to the U.S. “At some point, they will try the U.S., but I’m more excited in the short run about the U.K., Germany, Spain and Italy — and it’s still growing very nicely in France and Belgium but it’s quite large already,” Wilson said. “Maybe in a few years, they will see if they can make it work in the U.S. But we made this investment with our eyes wide open. We realize that this model may not work in the U.S. Do I care? Not really. On the other hand, if it works in the U.S., that’s great.”
There’s something particular in La ruche’s culture and model. While it found a great way to create a scalable food marketplace, Choukroun also talks a lot about the company’s mission, empowering local farmers and foodmakers, creating a better way to eat. “We have many applications to become a ruche managers, but we really screen those applications. But we’re not Uber, we don’t want to flood the market and foster competition between drivers,” he said. “We do everything so that community members don’t compete with one another.” It seems like La Ruche could grow even faster than that, but the company also wants to stay true to its values.