Travis Kalanick Photo: Marla Aufmuth / TED

According to a report from the Wall Street Journal, Saudi Arabia’s sovereign wealth fund has invested $400 million into CloudKitchens, a food startup led by Travis Kalanick, who is better known as a co-founder and former CEO of ride-hailing giant Uber. According to the Wall Street Journal, CloudKitchens completed an investment agreement with Saudi Arabia’s wealth fund in January, and actually notched a deal that valued it at around $5 billion.

Kalanick, who is widely known for leading Uber from the ground up but amid series of controversies
that later led to his ouster, assumed a leadership role at CloudKitchens after acquiring a controlling stake for a reported $150 million early last year. As the aforementioned statement suggests, he didn’t actually launch CloudKitchens from the ground up, but took a majority stake in the company shortly after his ouster from Uber.

CloudKitchens is an operator of so-called ghost kitchens, that is professional kitchens set up for the preparation of delivery-only meals. A general idea behind such kitchens is to enable already established restaurants to expand their delivery operations without putting pressure on their existing kitchens, and also do that at a lower cost thanks to flexible renting as opposed to setting up their own facilities. Using a ghost kitchen theoretically frees up a restaurant from possible pains of handling food deliveries from its main kitchen, and also lets it get into new neighborhoods at lower cost. The need for such service arose in response to the rapid growth in demand for restaurant delivery meals, and has already attracted several companies, of which CloudKitchens is one.

Restaurants aren’t the only parties that theoretically benefit from the use of so-called ghost kitchens. Food entrepreneurs who are looking for fast and expensive ways to test concepts and build their brand could also leverage such service for better business.

A situation where the government of Saudi Arabia backs a Kalanick-led startup doesn’t look far-fetched, given its previous investment in Uber. In 2016, Uber took a $3.5 billion investment from Saudi Arabia’s Public Investment Fund (PIF), a deal that gave the head of the sovereign wealth fund, Yasir Al-Rumayyan, a board seat at Uber. Kalanick, even after his ouster, also holds a board seat at Uber, making it plausible that was where talks of CloudKitchens’ investment began. What actually feels surprising is a $5 billion valuation, which would place CloudKitchens as one of the highest-valued startups in the U.S., and one that reached such valuation in a short time (after just a year of being majorly acquired for a reported $150 million).