A former investment banker, Pit Karbe is hoping Hello Fresh helps reduce the stress and hassle of making healthy home cooked meals.
Pit who previously worked as an investment banker at Morgan Stanley says he understand how busy City professional are, and how inconvenient it is sometimes to plan meals and shop for groceries, it becomes a chore he says.
I recently had a chat with Pit as we spoke about how the idea for Hello Fresh came about, his background, gaining traction, investment, challenges along the way and advices for entrepreneurs.
Hi Pit, Thanks for doing this. How are you doing today?
I’m great, thanks for having me. Before I started Hello Fresh I used to spend a lot of time on websites such as YHP so it’s great to contribute something.
Can you give us some background information about yourself?
I grew up in Germany and came to the UK to study management at the London School of Economics. After graduating I cut my teeth as an investment banker at Morgan Stanley before joining Lord Rothschild’s RIT Capital Partners where I invested in the global equity markets.
While I enjoyed the intellectual challenge of generating and researching investment ideas I ultimately gave in to a long-held dream of starting a business. Together with a cousin of mine who lives in San Francisco I started Bluebell Giving, a greeting card company with a charitable twist. We bootstrapped the company, which required many sacrifices. The transition from being a well-paid finance professional with a nice flat to sleeping on friends’ couches was quite an experience but it was very fulfilling. I learned a lot from my first venture and while the company still exists, I ultimately decided to focus on Hello Fresh.
What made you decide to start Hello Fresh?
Through Bluebell Giving I got exposed to the startup community and I constantly talked with other entrepreneurs and investors. It was in these conversations that the idea for Hello Fresh was born and I immediately saw its appeal. As a busy City professional I never had the time to plan meals and shop for groceries even though I love home-cooked food. As a result I often found myself eating convenience meals that I didn’t enjoy at all. There had to be a better way.
I think most people consider the weekly run to the supermarket a dreadful chore. Product quality is low and slightly more unusual ingredients can often not be found because supermarkets aim to keep their product range as narrow as possible. Add to that a customer experience that is at best mediocre and it’s easy to see that there has to be a better way. We make cooking incredibly easy and send our customers on a journey of culinary exploration. Hello Fresh does all the hard work, from planning recipes to sourcing ingredients.
What is Hello Fresh?
Hello Fresh is a revolutionary grocery delivery service. Every week we send our customers amazing recipes and all the ingredients to cook them. It’s a completely new way to cook and our customers are loving it. With Hello Fresh anyone can cook.
When did Hello Fresh begin to gain traction?
We launched the service very quickly. I started working on Hello Fresh in December 2011. By the beginning of January I had a team in place and two weeks later we made our first deliveries. Many things weren’t perfect in the first weeks: Our website didn’t look very inviting, people had difficulties signing up and we delivered the groceries in simple paper bags. The imperfections of our product meant that we didn’t grow fast from he beginning but it allowed us to test our assumptions and improve our offering using feedback from real customers. When people started sending us emails to tell us how amazing our service was, despite all these shortcomings, we knew that we were on to something. We kept improving the service and within a few weeks growth started to accelerate.
How have you been able to fund it?
We’ve been funded from the beginning by German and Swedish investors whom I had known for some time.
What is the biggest hurdle that you've faced or are still facing?
Our service is a very new concept and requires a lot of explaining. Consumers aren’t used to receiving their groceries in a box every week – keep in mind that we ship everything you need for a meal including meat and fish. As a result we spend a lot of time educating potential customers. However, we have found that once we explain our concept in more detail, people really like the idea and are eager to sign up. In fact, we see customer education as a big part of our mission, not just with respect to the service itself. Our goal is to use Hello Fresh to teach people about amazing food and healthy eating.
What’s your business model?
We’re a subscription-based e-commerce model. Customers pay for their delivery on a weekly basis and receive their groceries and recipes in return. The devil is of course in the details. Since customers pay the same price every week while the box content varies significantly, it is up to us to establish our margin every week. Add to that the fact that food prices are constantly fluctuating and it becomes fairly complex to make the economics work week after week.
What are the most crucial things you have done to grow your business?
It sounds trivial but the most important thing was to create a product that people want. While our offering was fairly basic in the beginning, it addressed a need and we continuously improved it in order to create a better experience for our customers. We’re still not where we ultimately want to be in terms of our offering but given that the company is only half a year old, I think we have achieved quite a lot.
What should we be expecting from yourself and Hello Fresh for 2012?
We have many ideas for improving our product and we’re very excited about what’s to come for Hello Fresh and our customers. Without giving away too much, I think Hello Fresh will look quite different 6 months from now.
What three pieces of advice would you offer entrepreneurs starting out today?
First, follow your passion. If you’re thinking about starting a business, it is paramount that you choose something you are truly passionate about. Don’t pick an idea because you think there is a market for it. Entrepreneurship is all-consuming – so choose something you think you can be excited about every day for the next five years.
Second, don’t over-analyse things. Have a good understanding of your market and a viable business model but don’t write a business plan – they’re a waste of time. It’s more important to test your assumptions in the real world.
Third, just get going! The most important step is to get started. You won’t be able to foresee every problem you’ll encounter along the way anyway. In fact, most entrepreneurs I know agree that if someone had told them about all the obstacles they would have to overcome, they never would have started in the first place. Entrepreneurship is about taking risks and figuring things out along the way.