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Huel raises £20m to bolster its international growth

1st Nov 2018
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Huel, a nutrition startup, just concluded a £20m series A funding round. But why now, when the company has grown impressively on its own. AccountingWEB spoke to Huel's FD to find out more. 

“First we eat,” M.F.K Fisher wrote, “then we do everything else”. That’s a line from Fisher’s landmark book The Gastronomical Me, celebrating the art of fine dining. The definition of eating has changed since then. Once the province of sci-fi novels, meal replacement shakes are now en vogue among hurried, time poor professionals.

Quick and nutritious, these powders replace the standard meal. No faf or prolonged clean-up. Huel is one such meal alternative (and arguably this burgeoning market's most successful exponents). Compared to Fisher's langorous French lunches, it’s more “We eat while we do everything else”.

Launched in 2015, Huel is the brainchild of serial entrepreneur Julian Hearn. His eureka moment was a strict diet and training programme and his search for an easier to satisfy his dietary requirements led to Huel, a nutritionally complete, quick and affordable meal alternative shake. Less romance, more convenience.

Where MFK Fisher was all about rich prose and rich meals, Huel’s style is altogether more clinical. The packaging is white, minimal and features Huel written in a bold Helvetica. Even the taste isn’t strong (although it’s not bad, and can be supplemented with flavouring).

“Nutrition comes first,” said Gavin Street, Huel’s finance director. “The cycle of R&D here is how we satisfy the nutritional stuff first.” Street is actually Huel’s first in-house FD. Until his appointment, the finance function was outsourced.

“We’re still at a nice size,” Street told AccountingWEB. “We’re seventy people now. It’s not fragmented in terms of departments and I still have that broad exposure to a range of topics. We are very relaxed, the structure is very flat.”

But there’s a balance to be struck. Street has been tasked with implementing a more defined budgeting process and monitoring spend -- without squeezing the soul out of the business. “We’re trying to be pragmatic because we’ve been very successful so far trusting people and giving them what they need to get on with it.”

Huel is growing up. It’s no longer a plucky, niche nutrition startup. In fact, it just closed a series A £20m funding round with Highland Europe, a leading growth equity investor. Huel’s attractiveness to investors is hardly surprising, the company attained a valuation of over £200m in three years.

That sort of growth is bound to draw the amorous attentions of VCs. Huel had a few suitors, so Street and founder Hearn were able to pick carefully. But why now? Huel was growing just fine on its own, after all.

“We were juggling a lot of things - cashflow, payments, expansion - while growing really fast,” explained Street. The money is insurance, basically. “We’re probably not going to touch about 75% of the raise and we’ll put it in an investment account. And the remaining amount we’ll use buying stock, launching new products and going into new markets. We’re also moving to a new office, so a bit of CapEx there.”

Huel, despite its trendy startup status, is rather fiscally conservative. Julian Hearn and Huel's CEO James McMaster have old-fashioned values, said Street. “You don’t always get that, sometimes the CEO or founder wants to move at a thousand miles an hour and quickly burns through the cash and forget about driving sustainable profit.

“Even when we funded stock through the overdraft earlier this year, we were very clear on where the money was being invested. We needed to do it to keep growing our income and to achieve a higher valuation because the valuation is based on the income.”

Budgeting is another aspect where Huel has matured. Historically, it was loose and the company only set its first budget last year. The budget is an ongoing forecast, said Street. “We’ll be looking at what our next sales target is each month and what the marketing spend is to drive that.

“So cost per acquisition on new customers and then we track customer lifetime value. So we look at our existing customer portfolio, look at the average time they stay, the average revenue, then each month we’ll know how much revenue rolls over month to month. And then we’ll have a target for how much of next month’s revenue should be new income brought into the business.”

The budget, as always, is subject to change and outside influence. January, for instance, is a few months away. That’s Huel’s biggest month, as customers start the New Year wanting to eat healthy after an indulgent December. “Our income nearly doubles in January and sets the income level for the rest of the year,” said Street. “But then, the challenge is estimating the right level of stock to buy upfront.”

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