Bluestone Capital forges ahead with its Cloud Kitchen expansion

• Boutique investor in startups plans to have 100 virtual restaurants operating by end 2022

Bluestone Capital is forging ahead with its cloud kitchen expansion, opening the latest location in Rajagiriya. The latest Bluestone Capital investment, Giga Foods Ltd. launched its Rajagiriya outlet on 15 October. With this launch Giga Foods now operates 12 virtual restaurants. Bluestone Capital Chairman Ajit Gunewardene in this interview shares key insights to the latest investment, its progress and future plans of Bluestone itself:

Bluestone Capital Chairman Ajit Gunewardene

Packaging

Gigafoods Mount Lavinia Outlet

Q: Can you tell us your journey to date in the Cloud Kitchen business?

 We launched our first virtual restaurant in Mount Lavinia which was Indian Affair in January this year. This was followed by a launch in Colombo 5 in February. Indian Affair serves authentic Indian food with menus curated by Indian chefs and ingredients from different parts of India. Next was Full’r, our unique high quality burger restaurant, followed by WrapCo, which is wraps, and Delights Delivered with the bowls menu. Within nine months we launched eight virtual restaurants.

Q: What has been the response so far and how do you plan your expansion strategy?

We are very encouraged with the response and hence the reason we are accelerating our expansion. The launch in Rajagiriya is targeting the demand we have seen coming from that area. We are using a complex proprietary mapping algorithm which uses a combination of demand, demographics and traffic flow data to decide on our expansion of locations and cuisines.

We will be continuing to increase our restaurant offerings based on the market feedback as well as spreading our reach with many more locations. It’s likely we should have 20 virtual restaurants (VRs) operating before the end of this financial year. We are working on adding at least 30 more next year as well. We are targeting to have 100 VRs operating by the end of the following year. It is apparent that significant digital adoption has taken place as a result of the pandemic and lockdowns. Hence what we are doing is re-engineering old business models to cater to this new norm.

Q: Bluestone Capital has been making some very interesting investments in the last few years. Can you elaborate on your philosophy?

We are a boutique Sri Lanka centric private equity investment entity. We are not for everyone. We do not promise quick returns. We do not make speculative short-term investments. Nor are we into passive investments. We are for specific investors who require this philosophy of investing in their portfolio. I would say we would appeal to somewhat mature and sophisticated investment portfolios that need diversity and the comfort of hands on risk management and oversight.

Q: Can you elaborate on how you make this philosophy come to life?

 We invest in growth businesses. But primarily we invest in the people that run the businesses. The end goal is value creation.

We don’t have a fund. We are very selective in the people and businesses we invest in. The selection process of which sectors we invest in is rigorous and backed by significant research. Our detailed analysis maps the future business landscape for these sectors. Ultimately we have to deliver growth that makes it worthwhile for our investors. This growth needs to be exponential. Hence we target people and businesses that can deliver this exponentially.

Q: How do you safeguard and grow the investments?

 We are acutely aware that we are custodians of our investors’ funds. We are also aware that once we make an investment we are custodians for all the stakeholders. We ensure that we align all these interests. Once we invest we follow the money. We are not passive. We sit on the board and normally chair the company. Governance is a key priority. If we believe our standards of governance and transparency will not be adhered to we decline the investment. We mentor and coach the leadership where required. We bring in a growth and value creating perspective. 

In mature businesses we are a partner to the leadership and management team. In startups at each stage of the business there is a maturity of leadership that is required. We closely monitor this in the leadership team. As we coach, mentor and guide, we will support the leadership to add the relevant management capacity to the business. A lot of time and effort is spent on this. 

We also have a very rigorous risk management protocol. Of course this is fine-tuned to each business to enable flexibility and speed. 

We don’t interfere in running the day-to-day business. We provide input towards the strategic direction. We actively participate in this debate. Most importantly we never take our eyes off the business.

Q: What is your strength to be able to deliver?

 Individually we have proven track records going back many years. Track records of exemplary governance, creating and motivating winning teams, identifying opportunities, precision execution and finally delivering returns. We have the technical hands-on experience and competence which we impart to our investee companies. This is our DNA. Hence it’s our core capability.

Q: Why did you term yourself boutique?

 I term ourselves ‘boutique’ because we are very selective in where we invest. Our priority is to identify the opportunities where we believe we can add value, make the difference and obtain exponential returns in the long term. As a result of our diligent hands on approach we can only invest in a limited number of projects at any given time. We are conscious that we should not spread ourselves too thin and thereby lose focus. This is why we do not have a fund. We raise money on a project by project basis.

Q: Are there enough projects of this nature available in Sri Lanka?

 In our view there is a lot of talent and opportunity that can attract investment in Sri Lanka. The key to winning when there is a great idea is capital. Without adequate capital the best ideas will fail. Next is professional management to ensure precision execution. We ensure we raise adequate capital upfront to enable a business to sustain and grow. Next we ensure we have a top management team that is suited for the job. We like to invest in businesses that have the potential of extraordinary increases in productivity and efficiency using technology. Businesses that can compete successfully and ride the inevitable wave as the country transitions into the digital age. Re-engineering traditional businesses to achieve significant operating leverage interests us as well.

Q: What investments has Bluestone made to date and can you tell us what excites you about them?

 We have four investments as of now. They are PickMe (mobility), Fintrex Finance (NBFI), Ingame Entertainment (esports/Gamer.lk) and Giga Foods (cloud kitchens).

If you analyse these carefully you will see that there is a common thread that runs through them. This is that technology and the digital economy will be the game changer and open up new vistas of opportunity and growth. With scale these entities can feed off each other. We are laying a platform for participating in the digital future.

We are very excited about the digital economy and the opportunities that will emerge as the country enters the digital age. The next several years will see dramatic change in the way business is done in Sri Lanka. From the Government down to micro business digitisation will be embraced. The pandemic and the resultant lockdowns have already created significant digital awareness and adoption. This experience will hyper accelerate the digitisation process of the economy. We can leapfrog and catch up and even race ahead of the rest of the world. There will be huge investment required to do this. This is what excites us. We believe we along with our investors can be part of this revolution.