VertsKebap: The $36 Million VC-Backed Mediterranean Street Food Startup

“OUR MBA WAS VERY CHEAP”

For Stein and Heyne, the decision to go for an MBA was simpler than for most. They each received three scholarships that covered the majority of their tuition. “That decision didn’t have to be made on the money because we knew that our MBA was very cheap,” Stein says. They chose McCombs largely because of the dual-degree option with their German university, but Austin also appealed to the VertsKebap pair. They were already familiar with Texas from their time in undergrad and appreciated the capital city’s burgeoning startup scene. Stein says many of his MBA classmates also explored starting their own businesses, though mostly in tech. He knew of only two other restaurants.

So how did two MBAs mange to convince investors to shell out some $36 million for a restaurant? Stein attributes their success to two things: delivering on your promises and presenting your startup as a professional business. “A year ago we promised our investors we would open 15 restaurants, and we did open 15 restaurants … it’s just living up to the expectations of the investors over and over again,” Stein says. “In our case that meant that many investors invested several times.” He points out that the founders took their business very seriously, and as a result, their investors did too.

When asked about the startup funding bubble, Stein is quick to dismiss its applicability to VertsKebap. He doesn’t see $36 million as an excessive injection of capital. “The true and honest answer is [VertsKebap] is not a startup anymore. At 30 restaurants plus, we’ve got several hundred employees. It’s difficult to compare that with a startup that’s just starting up,” he says. “It has been eight years since the idea generation and five years since starting … You have to understand it is what it is in the restaurant industry, and you cannot enter the market without significant funding.” He points to competitor Cava Grill, which raised more than $60 million, and Chipotle, which received some $340 million from McDonald’s. But as anyone familiar with Chipotle’s E. coli scare knows, even successful and established restaurant chains face big risks.

RISK VERSUS REWARD

Stein points out that this is often the most overlooked part of the glowing founder narrative. “They only write about the success story and about the fun and the enjoyment and all the positive feedback you get in the end, but what many people overlook is the risk you take, especially in the beginning,” he says. ” There were many sleepless nights for us not only because of daily operations but really because there’s lots of skin in the game, lots of risks that you take, especially in our capital-intensive industry,” he says.

He points out that VertsKebap made plans to grow to 45 or 50 restaurants this year, but without the chain’s most recent $20 million funding round, none of that would be possible. “The moment you realize that now it’s time to acquire funds or put them down on the table, that’s when you spend the most time awake and think about the risk versus the opportunity,” he says. So far the risk has proved worthwhile for this MBA business.

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VertsKebap: The $36 Million VC-Backed Mediterranean Street Food Startup