Covid 19 coronavirus: Small firm marketplace SOS Business receives $5m from US investors

The business, which enables consumers to buy vouchers for their favourite cafes and restaurants, was started by New Zealand Trade and Enterprise official David Downs during the first lockdown in his free time as a way to keep small hospitality businesses afloat through the Covid-19 pandemic.

SOS Business started out as SOS Cafe but demand from small businesses outside cafes prompted it to change its name. It has generated more than $2 million worth of sales through about 70,000 vouchers since its inception in March.The business is set to inject $5 million into the New Zealand economy, part of the purchase agreement and change in ownership to Austin, Texas-based, restaurant investors inKind.

inKind, which has itself set up a similar platform in Australia called Save Hospitality and Serving Hospitality in Canada, will take over the operations of the website to scale and offer more services, including financing and marketing for small firms. Downs will remain in an advisory role.SOS Business was an instant success upon its launch and has grown to a database of 2400 businesses, attracting attention from similar organisations throughout the world.

New Zealander of the Year nominee Downs said SOS Business crossed paths with inKind when it was helping an Australian company that already had an arrangement with inKind."When we got to the end of lockdown [inKind] asked me what we intended to do with SOS and we said we weren't sure because we didn't really think about the ending when we set it up and they said they would be interested in helping out," Downs told the Herald.
"Because we set it up as volunteers we were all doing it in our spare time and during the first lockdown that was all fine because we had plenty of time, but then we all went back to our day jobs ands we realised this thing needed to keep going because there were so many people that had bought vouchers and needed ongoing customer support."The business was technically sold for nothing as Downs did not earn anything from the sale - it was sold on the condition that inKind invest $5m into SOS Business.When the first lockdown finished, Downs thought transactions would die down on the site. Instead, activity has been constant.

Fonterra has bought vouchers for all the farmers in the central North Island and universities and other corporates had also been using the site, he said.

"New Zealand has been extremely successful in its fight against Covid-19, even given the latest setback. We've seen how committed New Zealanders are to tackling this virus together, and also supporting their local businesses," former restaurateur Johann Moonesinghe and founder and chief executive of inKind, said.
"SOS has been a massive help for restaurants, cafes, and other businesses Kiwis love. Our plan is to expand the SOS offering, and help support New Zealanders as they work through another lockdown."

inKind has sold more than $30 million of gift vouchers and helped more than 500 businesses across North America and Australia.It intends to invest $5m in funding for New Zealand businesses in its first year. The money will be invested through inKind's unique funding model, which provides businesses with upfront capital in exchange for vouchers. inKind then on-sells gift vouchers to customers through the inKind app, which acts as a loyalty platform encouraging long-term engagement with customers.

Downs said SOS Business had been told by "dozens and dozens" of vendors that the platform had saved them from going under and others that they would have to lay off staff without the income.

"When we got to the end of it we thought 'We can't stop, these businesses all needs us, but we've got day jobs' so that's why it's a nice mix to find these people who do this for a job and will add some significant extra value," he said.

Kiwi SOS restaurant voucher scheme gifted to US startup

SOS Business, the local restaurant voucher scheme created during the first Covid-19 lockdown, has been transferred to an American startup as part of a $5 million package for local businesses.

The non-profit platform was created by David Downs, Joyce Quah and Naadei Atafu just minutes after the level four announcement in mid-March, offering cafe and restaurant vouchers online that could be redeemed post-lockdown to help businesses pay rent through the period of zero revenue.

The platform has since expanded to include 2,400 businesses, ranging from wildlife parks to barbershops and bars, and has sold $2m in vouchers.

The deal will see the platform's ownership transfer free-of-charge to Texas-based restaurant investor inKind, in exchange for it committing to buying $5m of vouchers from its roster of New Zealand businesses.

Downs, who is also chairman of the Well Foundation and NZTE general manager of projects, said he started the platform after trying to order lunch from the café down the road online before realising most hospitality businesses didn't have online order capability.

"Of course, he's a café guy, not a website guy and I used to be a tech guy, so I set up a website to sell coffee for him, then I rung around all the locals and it snowballed from there."

So far only about 40%-50% of vouchers had been redeemed, which Downs said showed people were more interested in supporting their local haunts than getting a cheap meal.

He will stay on at SOS/inKind in an advisory role and believed inKind would bring significant value for members on the platform.

"The whole SOS thing was set up as a non-profit to help small business so I didn't want to suddenly change it to a commercial model. I was looking for someone that was going to keep the charitable side of the game but also bring something of value."

inKind runs a service that helps restaurants get off the ground or upgrade their premises by buying a certain value of vouchers at a discount, then selling them through its platform at a margin, which chief executive Johann Moonesinghe said worked out to be cheaper than interest rates from traditional lending.

Moonesinghe said while many restaurateurs might be great chefs, many don't know about payroll systems, labour costs and managing overheads.

"Restaurant finance in the US is broken, it's usually high-interest loans or taking a percentage of the profits from the business. Neither of those normally work out well for the operator."

So far it has financed over 400 restaurants this way, with most of its recent funding going towards retrofitting restaurants to comply with Covid-19 distancing requirements. Moonesinghe said the company will offer this service alongside SOS Business's original service, as well as marketing support for restaurants.

"SOS has been a massive help for restaurants, cafes, and other businesses Kiwis love. Our plan is to expand the SOS offering, and help support New Zealanders as they work through another lockdown, and come out the other side," Moonesinghe said.

SOS Business and inKind connected after inKind saw some of the extensive media coverage around SOS and called Downs for advice on Save Hospitality, a similar programme it runs in Australia.

Downs said handing the non-profit over to inKind made sense, particularly as it had been interested in the New Zealand market for some time.

"I talked to these guys and there was a good cultural alignment, Johann is a restaurateur himself and I used to be many years ago; they understood that we were only doing this to help the businesses, [and] there was no profit in it for us."

He said Auckland relapsing into alert level three and social distancing requirements elsewhere highlighted that the hospitality industry still needed support from the public, and $5m injection would be well received.

"My perception is it's a mental health challenge for many of these businesses, as much as it is an economic one," Downs said.