- Mr Price is buying Yuppiechef in a deal worth almost half a billion rand - in cash.
- A US hedge fund owns a minority stake in the online retailer, but the main beneficiaries are thought to be the company's three directors.
- The two founders started Yuppiechef on the side in 2006, and it took years before they earned money from it.
- For more articles, go to www.BusinessInsider.co.za.
After starting Yuppiechef in a lounge in a middle-class Cape Town suburb, and waiting years for it to take off, the founders of the retailer have finally hit a massive pay day.
The retailer said it will pay approximately 1% of its market capitalisation for Yuppiechef. Mr Price's market cap before the announcement was almost R47 billion, which means it will buy Yuppiechef for roughly R470 million. In cash.
The $50 billion US hedge fund Tiger Global Management, which bought a minority stake in Yuppiechef in two transactions, in 2011 and in 2013, will receive some of the money. Tiger has not disclosed the size of its stake in Yuppiechef. (Tiger invested $100 million in Takealot in 2014, selling the stake four years later to Naspers.)
The three other main beneficiaries of the deal are the only directors of Yuppiechef: Andrew Smith and Shane Dryden, who founded Yuppiechef, and Paul Galatis.
Here’s what we know about them:
Smith matriculated from Hilton College in 1998, receiving the school’s highest academic marks in his year. He started to do a degree in computer science, but quit after a couple of months to become lead programmer at a Pietermaritzburg-based tech firm.
After moving to Cape Town, he became friends with Dryden, and they later started a web development agency together called LiveAlchemy.
On the side, they started to sell all kinds of products online – starting with an electrified racquet that killed flies, the first product they ever sold (bought by Smith’s mom). They moved on to sell flags and, eventually, started exploring the idea of selling kitchen tools from a single site.
That gave birth to Yuppiechef, which was started in Smith’s lounge in Plumstead, Cape Town in 2006. They did all of the site development themselves, after-hours. At first, they only offered 32 products. It took a long time for the site to gain traction – in their first four months, they only made 11 sales (ten of the sales were to friends or family). After a year, they only had 200 customers.
They didn’t have any capital to invest in the business, and could only buy stock from money they made selling products.
They continued to package all products from Smith’s lounge in Plumstead for a number of years, until they opened a warehouse in Westlake in Cape Town. It took five years before they were able to get a salary from Yuppiechef, Financial Mail reported.
From a 2017 interview with the Sunday Times, we know that Smith is married, he likes making biltong and that he can’t live without his Rancilio espresso machine (or a manual coffee maker called an Aeropress when travelling).
Dryden also went to school in KwaZulu-Natal, graduating from Maritzburg College in 1992. He went on to work at a software group in the UK, before returning to South Africa in 2006.
After starting an agency with Smith, and selling fly zappers and flags on the side, Dryden – who is a foodie – suggested that they start to retail kitchen tools.
He also came up with the name Yuppiechef – on a Sunday morning, lying in bed.
“Yuppiechef as a name is something which is specific enough that allows us to come across as the experts, we know what we’re talking about, we are in the kitchen category, but also Yuppiechef is not necessary for real chefs,” Dryden told the Small Business Site. From the start, he envisioned the logo in pink.
The three most harmful addictions are heroin, carbohydrates and a monthly salary. - Fred Wilson— Shane Dryden (@drychilli) July 23, 2014
Dryden also, unwittingly, established Yuppiechef’s greatest marketing trick: the hand-written note which accompanies every delivery.
After Yuppiechef’s first sale to a stranger in 2006, Dryden was so “overwhelmed with gratitude” that he wrote her a thank you note, ITWeb reported. They persisted with the notes, sending out a million since 2006.
Together with a strong emphasis on client service, and word-of-mouth marketing, this proved to be key in its growth over the years.
With Smith, Dryden started a new company called Edison Stone five years ago. It distributes branded products – like Wüsthof and OXO - as well as Yuppiechef’s own brands, like Jimmy Public and Humble & Mash brand, in the wholesale market.
Currently, wholesale represents 15% of Yuppiechef’s turnover, Mr Price said in a statement on Monday. Its online retail operation brings 70% of its sales, while turnover from its 7 physical stores represents the remaining 15%. According to the retail giant “it is satisfied with Yuppiechef’s positive bottom-line performance and prospects for margin expansion”.
Yuppiechef’s management team will continue to run the business, Mr Price said.
Galatis was a classmate of Smith’s at Hilton College, where he was head boy. Unlike Smith and Dryden, he has a university degree, in business science from the University of Cape Town.
After graduating, he was chosen to become part of the Democratic Alliance’s Young Leaders Programme, and in 2001, won a South African Music Award for designing the best album cover (Just Jinger’s Strange World CD).
In 2004, while with Standard Bank, he lead a project to launch the inaugural season of 20-over cricket in South Africa: the Standard Bank Pro20. He worked with cricket authorities and SuperSport to help draft the rules of the game and was responsible for marketing and branding the event.
He then launched his own design and e-commerce agency in the UK, before joining Yuppiechef as a director in 2008. Galatis was in charge of marketing at the company.
These days, he is based in Palo Alto, close to San Francisco after founding a new start-up called Names & Faces. The company designs visual employee directories for companies “where there are more people than one can comfortably remember”.
His company has received funding from Y Combinator (YC), an American seed money start-up which has launched more than 2,000 companies.