Tovala, the Chicago-based smart oven and meal-delivery startup, announced today it has raised a $20 million in Series B funding.
The round, led by agrifood venture capital firm Finistere Ventures, follows $9 million in Series A funding, bringing the company’s total funding close to $40 million.
It’s an interesting time for Tovala to raise such an impressive B round, coming during a pandemic where many venture firms have refocused their efforts on stabilizing existing portfolio investments and large corporate investment arms have either dialed back or outright eliminated venture initiatives.
But while the pandemic has chilled many industries, Tovala has only seen business accelerate the last few months in part due to its position at the intersection of two markets benefitting from quarantine-induced cooking: countertop home cooking appliances and home food delivery.
As we’ve noted here at the Spoon, the combination of stay-at-home orders and restaurant dine-in shutdowns led to an explosion in home cooking activity, which led to countertop home cooking equipment sales growth that was at multiples of normal industry volumes.
But according to Rabie, who I caught up with last week to discuss their latest funding, while Tovala has experienced strong growth during the pandemic, their business had actually started taking off in the second half of 2019.
“The business has been growing really fast for nearly a year now,” said Rabie. “The investors took comfort in the fact that this wasn’t a COVID trend where our business took off and might go away when normalcy returns, but actually the opposite. Business was booming pre-COVID, COVID accelerated that growth, and we believe it will accelerate adoption after COVID as people build new habits.”
Since Tovala started shipping a few years ago, I asked him why business took off last year. According to Rabie, the main difference is they changed how they talked about the product with their customers.
“We went through this exercise over the first half of 2019 to rebrand the company and better speak to our core customer,” said Rabie. “If you come to our website today versus a year ago, it looks like night and day, it’s different messaging, different photography, different videography, different user experience, same core product, just marketed differently.”
After Rabie and Tovala spent time talking to their key customers who used the Tovala multiple times per week, they realized the company’s value was in helping to solve the problem of weeknight dinner. They also realized they weren’t an oven company so much as a service company.
“The oven is the vehicle to access that food but most of our customers are not really in the market for an oven. It was kind of a lightbulb moment.”
After the rebrand, the company has seen an increase in annualized revenue of 300 percent since September of last year. In some ways, Tovala has been the little smart kitchen company that could, continuing to grow and raising more funding as other, more high profile companies, have struggled.
I asked Rabie why Tovala has succeeded when others haven’t.
“A lot of companies haven’t made it and I think there’s a lot of reasons why,” said Rabie. “The first reason is (you need to be) super clear on the problem you’re solving and making sure it’s a real problem.”
He also said that while he thinks a recurring revenue business is necessary nowadays, it can’t just be an afterthought.
“Whatever that subscription component is, it has to be inherent to the product and it has to make a lot of sense.”
Tovala plans to use the new funding round to increase staff, expand production capabilities and fuel growth. And while Rabie indicated they will build on top of their current technology, he made it clear the funding won’t largely be sunk into developing a next-generation oven.
Makes sense for an oven company that isn’t really an oven company.