Intro

KY (Clip):

“We have over 650 people in our organization. It's a lot of people to take care of. It's a lot of people to feed. And, you know, over the, um, we built this team during the pandemic when FNB was just completely decimated. And we were one of the ones, one of the lucky ones who were able to hire a bunch of people, you know, give them livelihood and I've come to like treat them as family and you know, that keeps me going every day.

They need me to be at the top of my game. They need me to keep inspiring them. They need me to motivate them. They need me to raise funds. They need me to, I work for them.”

SCS (Intro):

Hey there! As we continue to celebrate AAPI month, it would be remiss of me to not bring back this conversation I had with Kim Yao, CEO and co-founder of CloudEats.

From selling booze online and working in Philippine F&B to creating a revolutionary cloud kitchen concept, Kimberly Yao’s entrepreneurial journey has NOT been a walk in the park to say the least.

With the same passion and interest for food and e-commerce, Kim and her co-founder Iacopo Rovere created CloudEats, a company that combines multi-brand, multi-cuisine, and multi-platform operations. I spoke with Kimberly Yao at the end of a tiring 2022, where she shared their challenges they faced during the pandemic and the initial difficulties in looking for the right talent.

Yet,

With nearly $14 million in funding and a steadfast commitment to diversity and inclusion, they are not just building a business, but also a movement that continues to inspire underrepresented founders to keep dreaming big.

CloudEats is continuing on with a strong growth trajectory. Years later, their story is indeed far from over. In this Billion Dollar Bite, I extract key takeaways from Kim Yao, who shares with us about how each chapter of her companies demanded different versions of her as a leader, and the future of 'virtual' or 'ghost' kitchens. You DON’t want to miss this one.

Takeaway 1: 

Passion is fuel for your vision, BUT it is your vision that brings discipline to your passion. Both come hand in hand.

SCS:

But if you think about what really brought you to F&B and when you say it's your passion. How did you arrive at that? 

KY (Clip):

Yeah, so I grew up in restaurants. My parents always had restaurants growing up.

I did my homework in the restaurant. I literally, you know, went there after school and I spent a lot of time there. And I think it just became like my second home, like at some point in time, maybe when I was five to eight, because my parents were at the restaurant so often. I pretty much lived there.

Right. It was like my living room. Um, so I think that, you know, growing up just made me understand how food makes people happy. How food, you know, fills your stomach literally, but it also fills your heart and people come together and food just makes people happy. So I wanted to reimagine food for today's world, which is for delivery, right?

So it is a process of, you know, How I arrive at, at Cloud Eats is, um, you know, quite interesting because I went from being in traditional food and beverage, which is literally building restaurants, building concepts like physical stores. And then I started this, um, liquor delivery company, right. Which is just, you know, mainly beverage.

And then it kind of comes like full circle with Cloud eats, with, with food and beverage and, and technology. And I think it's just a, it's a great progression, I would say. And I, I got lucky in, in that sense because it's not always. Easy to do something that you love. But in this case, I guess I was quite fortunate in terms of that.

That is an interesting point.

And, and, uh, you know, to arrive at your passion and actually make it, you know, your career, it's not as easy. And as you said, you know, with F& B, it is really tough, right? The margins and. Every other day there's competition, and now you're going into Cloud Kitchens as, uh, you know, big guys on the forefront.

What keeps you going? I mean, when it gets really, really hard, and what keeps you sticking to the fact that, okay, your passion could actually be your career? 

KY (Clip):

I think, you know, what keeps me going is the opportunity. That's quite clear to me. If you were able to take the opportunity out there and convert that into, you know, an action plan, convert that into a strategy, I think, you know, there's unlimited opportunities in that sense.

So if you have like one, one kind of cloud kitchen model today, it's so easy to come up with something else, innovate. And then the harder part is actually making sure that you follow through on those concepts, right. On, on that theory. So for me, one, that's one. The other thing is the people. So today we have over 650 people in our organization.

It's a lot of people to take care of. It's a lot of people to feed. And we built this team during the pandemic when F& B was just completely decimated. And we were one of the ones, one of the lucky ones who were able to hire a bunch of people, you know, give them livelihood and. I've come to like treat them as family and you know, that keeps me going every day.

They need me to be at the top of my game. They need me to keep inspiring them. They need me to motivate them. They need me to raise funds. They need me to, I work for them basically. Right. So my job is to give them the tools, resources to succeed and they form part of the business without them, the company wouldn't be there.

So I think, you know, more than anything, it's the people as well.

Takeaway 2: 

It can feel like you’re behind your game, but remember in the words of Steve Jobs, the dots connect looking back. Each experience you have is building you up for the next, and this was the same for Kimberly— who began to learn the ropes of distribution and brands from her first startup, Boozy.

SCS:

Tell me, I mean, you know, from Boozy, what, what happened in that chapter? I mean, that was, uh, you know, focused on alcohol delivery specifically, you know, to your door. 

KY (Clip):

Yeah, so that was a, it started as a side hustle, right? You know, we had a lot of connections with a supply, uh, in terms of the liquor distributors in that sense of the brands.

I mean, this was 2017, so it's, it's a while back. And in the Philippines, at least at that time, there was no way that you could buy liquor on demand. So the idea was how could we make liquor accessibility quick? How could we, you know, bring the party to people basically, right? 

So it was a very convenience driven play and we thought that liquor was a very sticky category. So once you get them in, you know, they'll always come back. And it was one of the e-commerce categories that nobody else was focusing on because there was like generalists out there, grocery, they were already doing all of these things, but there was no one focusing on a specialty.

And we thought that with the supply that we had, the access to the supply would be a great business model to start. So it started as a side hustle. You know, we put in like 20,000. We were four founders. And a year after that, it became something that other big companies were interested in. So one of the people who contacted us was the owner of a large conglomerate in the Philippines who owned the biggest liquor or spirits company, basically.

So when these guys come calling and they say, Hey, we want to take a look at your business. And I'm like, well, hold on, this is something that is very interesting to us. But what's in it for us. And that was very young back then. So, you know, the agreement was, they would come and invest, they would help us to scale the business up. 

And I think that's what I learned. So to your question, right. What did I learn in that process? I guess it's not enough to want to run a business. It's not enough to start a business and to have passion, but it's also important to learn how to scale. Because, you know, if you go from 0 to 1, that's maybe easier, but from 1 to 100, that's when you need to level up your skills, change the attitude that you have in the behavior you have on a day to day basis, midterm, long term, it just changes.

You need to change in order to have a business that is of a larger scale in that sense. So before that, all my other businesses were very entrepreneurial, quite scrappy, very resourceful. It was really my own. 

And this time I had to work with three other people. I had to work with a large conglomerate who had governance, all of these, like, it was a learning process.

I think it was great. It was, how do you go from one to 100 and 100 to 1000? And I think that helped me with my second startup, which is CloudEats because then I didn't have to start from scratch and I didn't have to start from like a lower base because I understood what big companies like these guys were looking for when they wanted to invest in a young startup.

Takeaway 3: 

You need to be ready to grow and evolve as a CEO.

KY (Clip):

You know, I guess for me because it's been three years since we launched the company So it's like I think about it as year one year two and year three and I had to be a different Sort of ceo in year one versus year two versus year three at the beginning. It was It was all me, right? You have to do everything yourself, call everybody yourself, sign every check yourself, and you have to make sure that the wheels are turning, right?

So it was a lot of on the ground stuff, I had boots on the ground, and everybody needed me for everything. So the responsibility then was, You know, get the right people on board or at the time, anybody who would want to work for you. Right. And then, you know, all of these people that you have on board because it's a new company, fresh company, you'd have to make sure that, um, you're there for them.

You support them. And then when you go on the second phase of the company, when you know, proof of concept is done, great people invested in your company. Now, what right now you have a bunch of money and how do you spend it? So the first thing that we really spent on is like a better management team. Then you.

Have PR, then people know, you know, a little bit about your company. Then you can hire more experienced people, better people, like a management team to help you put things in place. And this is like the beginning of scale. So at this point in time, it's like, how do you train the trainers? How do you train the people who are supposed to do things?

So then you become like a guidance counselor. Then you become like a trainer, a coach, basically. And then as we go to the third year, the number of people just completely explodes. At some point in time, it's like you hire people who you don't even meet, you forget about how many people there are in each team and there's just too many people, right?

But I think at that point in time, when you get to that point, and it's just, it's just physically impossible to directly have a relationship with each and every single person, then you need to be. Like a motivator, you need to be an inspiring role. So then you become the CEO motivator, CEO inspiration, right?

Because you're there with 600 other people who are looking at, what is she going to say next? What are we going to do next? Like, what is the evolution of our vision? And I think, throughout those stages, you're right. I had to become a very agile leader as the requirements change very quickly.

Sometimes it scares me, to be honest, because it's a big responsibility. But at the same time, it excites me also, because I'm willing to change. I'm willing to learn. I think as long as you're open to. What's next? As long as you're open to the unknown, then there's an opportunity for you to improve yourself as well.

Takeaway 4: 

The power of the Time Machine theory, but don’t forget to adapt in building in other markets. The Time Machine theory popularized by Masoyoshi Son speaks to how US is the future, and every other country will go through the same technology transition as the US. So if you know what's successful in the US, investing in other geos is like going back in time in a time machine.

This allowed him Masa to get Alibaba in the bag back in the day. And as a result the idea is surprisingly influential in Asian investment circles: but let’s not forget how important it is to localize and adapt or die: think about Didi, Grab winning over Uber precisely because of this point.

SCS (Clip):

And I will say Prime Delivery, it's, it's like the joke that the comedian says, you know, you can literally be in your bed, snap your fingers, and then there you have toilet paper, a hammer, a this, a that, so we take it for granted, but he tells a little bit about where Philippines is in sort of the e-commerce delivery space.

KY (Clip):

We do have 7,107 islands, plus or minus 10, depending on the tide. Um, short anecdote on that. If you think about having to do logistics in a place in the country with 7, 000 islands, it's a nightmare, right? And monumental tasks to guys like, so here there's, there's, um, a company called Lazada, which is pretty much like the Amazon of Southeast Asia.

And they took on that challenge and they launched seven, six or seven countries in one day, and they put like CEOs in every country, and they said, We are going to build the Amazon of Southeast Asia. And they did. So today it's Lazada and Shopee are the two huge marketplace players here in Southeast Asia. Um, e-commerce space, I would say it started booming really in 2016, 2017.

Internet penetration was quite low back then. Smartphone penetration was pretty low. And it completely changed when the, you know, China smartphones that were like a hundred bucks, a hundred dollars each just started flooding the market and it became quite accessible to have a phone that can download apps, that can connect to the internet, like on demand.

And that changed the game. Everyone in retail had to adapt and everyone had to have an online implementation arm. Traditional companies started talking to guys like Lazada and say, so how do I sell online? And I think that was the time when we also started Boozy. And even though it was a niche, vertical, it was basically beverage or alcoholic beverages at that time.

It just showed as well how, if you do it right, then you can definitely penetrate that market, scale up.

Ohh and this is a bonus one: as a sub takeaway: be sure of your LOCAL advantage

SCS:

What stops a McDonald's from, just doing a version of this?

Because they have all the data. I mean, we all know by now everything is data driven, so they know what we're putting out there. And I guess to your point, one of it is, Filipinos and a lot of Southeast Asians are just hungry, literally, but hungry for more choice and variety, and not glued to the big brands.

Many don't know this, but in Asia it's actually marked up, right?

KY:

Yeah, it's not like US fast food prices. I guess to your question, maybe one other thing that stops them or restricts them, limits them. Like these big brands like McDonald's, from doing something like this is, they're just a very big company and a small move that they would like to make takes them a long time and a titanical effort to do.

So if you think about new product launches: there was a sakura milk tea, it was a beverage that McDonald's launched. When we spoke to somebody who worked on the McDonald's launch of this, it took them like eight months to develop a plan and implement this plan to basically launch one beverage.

It's a great beverage, I must say. But at the same time, the agility of these companies, because they're just so big, it’s very limited. So for us, if you ask me, how many brands that we launch every month, it's like eight, right? And we iterate very quickly.

If you ask me how many dishes we launch, then we'll spend the whole day talking about it. But the idea is basically we're quite agile, right? So we use our resources to test. We have a lot of hypotheses, and the testing is quite exciting actually, because then you let the market tell you what they like, what they don't like.

And it's fast. It's like an accelerated brand building process versus if you are guys like McDonald's, then you go to Nielsen. And Nielsen does this whole expensive long study. It's a really long process.Think at that scale they need, and at that opportunity works for them.

But I guess as a startup who is like, trying to get things going very fast, then we have a different approach to it.

SCS:

Inefficiency is one that you're solving for. And of course, because it's so fragmented in Southeast Asia, this efficiency and convenience is amplified, that people definitely see the value of it.

How's your price point? Is it also cheaper, would you say?

KY:

Yeah. Sne of the things that we value is, that we position our brands as having high value for money. So to your question, if you look at like Shake Shack for example, here sells a burger for like a chicken burger for $5, $6.

Our chicken burger is at $2 50. So we are able to give you a high quality, very similar burger for half the price. So that's one example. If you take for example, SaladStop again and another quite important example, they sell a Caesar salad wrap for $8.

And I remember this because I just bought one the other day. It's quite good. But at the same time, who can afford $8 for a snack at best, right? Or a lunch, like a wrap in a country where the average family makes $400 a month. Who can afford $8 for a salad stop wrap? Nobody. Right?

So what we did was we took everything in SaladStop and tried to replicate that, localize it, and have everything for half the price.

So it's really trying to give the highest quality food possible for the best price point. We're not trying to say that we're cheap. I don't think the word is cheap, but I think it's high value for money.

So you get more than what you pay for compared to the other competitors out there. And I guess the beauty of having a large brand portfolio today, we have 40, as I mentioned earlier, is that we can go anywhere from selling.

We have brands that do $2 average or average basket size. These are like our value brands. It's like a very simple meals at $2, but we also go up to burgers that are at $12, for example.

And because we, again, have a high efficiency plate, all of these different dishes are being cooked in the same place by the same people with the same resources or the same equipment. So whether it's a $12 burger or a $2 rice bowl, it's being done in the same way, same people and using the same resources, which I think is quite a good way to really maximize the resources that you have.

SCS:

And actually this is really fascinating. Sometimes I do cave into the ease of just having a delivery versus cooking myself quite often, especially when it gets hectic.

KY:

This whole topic about cooking versus ordering in, it's become so pronounced because of the pandemic. So now that you know, the people are coming out of the pandemic, everything is sort of coming back to normal.

I think the convenience of ordering food online is not something that you can replace anymore. It's literally ingrained in people that you can sit at home, watch Netflix, have a few clicks on your phone and food shows up. And I think that that whole concept is not something that you can erase from people's minds anymore.

They got so used to it, they saw the value of it. And sometimes I even tell myself, I don't think we're just selling food, but we're selling convenience.

You can order from us anytime of the day. It shows up at your door so fast because our cooking time is so low. So it's really a convenience factor that I think is also gives us the edge.

Takeaway 5: 

This is one I wish I knew sooner: not taking a risk, is the biggest risk.

SCS (Clip):

Yeah. Yeah. And Kim, you know, you're, you're skiing over this, but how did you, I mean, it was a blind leap of faith, but you knew enough as an entrepreneur that first of all, the idea was sound, I suppose that that was the intention. We need to talk a little bit about cloud kitchens that not everybody understands as well, but it was the idea and then it was the person.

KY (Clip):

How did I decide? So obviously I trusted Inaj a lot. Inaj is the one who introduced the two of us. Um, he was one of the leaders in the tech scene in, in, uh, in the Philippines back then. And it was very small, right? There were not many, Um, founders, there were not many startups back then compared to now, I guess before there were like a handful.

Like if we do a tech startup meet, I would be the only female and there would be like, you know, 10 other guys there. So it was a very different scene back then. And we all knew each other, right? So I think the opportunity to work with Inaj and, and Jacopo appealed to me a lot because even though I started boozy, I wasn't in the big tech seat, right?

I wasn't rocket internet. Like, unlike the both of them. Um, so I think that, you know, what convinced me was that I knew I had tons of stuff to learn from them, right? It was a, it was like a, they had the Bible for how to build a tech startup and scale it up and, and fundraise. And they basically sold me this idea and I said, okay, let's do it.

Right. And you know, at that point in time, I always knew that, Hey, even if this doesn't work out, there's always something else that I could do. Because I was always an entrepreneur. So if I build something and it fails, I could always build something again. As compared to, hey, if I build some, if I join this company and it doesn't work out, oh no, I'm disgraced and maybe other people won't hire me.

But because I'm a builder, I always knew that even if this doesn't work out, I can do something again some other time. I had that confidence. But at the same time, like you said, the business model, it was so relevant to me because when I had restaurants before, when I was managing like a hospitality company, you would invest a lot of time, capital, training, resources into something physical, and it would take you a lot of time to recover that investment.

And the turnover rate of these concepts were very high, at least in the Philippines. At the same time, the mortality rate of restaurants, I guess, everywhere in the world is very high. So if you open a restaurant, 65 percent chance it doesn't work out in the first year, right? The industry is very notorious for that. 

And I think that this cloud kitchen concept just, just fixed a lot of those, you know, pain points in terms of scaling up an F&B business. I was very interested to say the least because of that and also the opportunity to learn from the both of them

Closing:

SCS:

This quote deserves a second read:

“Even if this doesn't work out, there's always something else that I could do. Because I was always an entrepreneur. So if I build something and it fails, I could always build something again. As compared to, hey, if I build some, if I join this company and it doesn't work out, oh no, I'm disgraced and maybe other people won't hire me.”

Wow wow, what an inspiration Kim continues to be as she builds!

As always I recommend you dive deeper with the full episode that I’ll link in the show notes. I’ll love to hear what other takeaways I missed from the full episode — AND remember, I read all my messages on instagram so hit us up at @billiondollarmovespodcast at @sarahchenglobal with your thoughts!

Until next time, keep making BDM!