inKind's Innovative Approach to Restaurant Financing

inKind, founded by Johann Moonesinghe in 2016, has emerged as a significant player in restaurant financing, providing over $600 million to more than 6,000 restaurants across the United States. The company operates a platform that functions similarly to ClassPass, selling dining credits that can be redeemed at participating restaurants. These credits are purchased at a discount, allowing inKind to finance restaurants while offering customers rewards for future visits. This model aims to create a win-win situation for investors, restaurant owners, and diners.

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inKind's financing strategy involves raising capital from investors, which is then used to provide cash to restaurants in exchange for dining credits. For instance, inKind might offer a restaurant $1 million for $2 million in credits, which are later sold to customers for a profit. However, this model carries inherent risks; if a restaurant fails shortly after receiving funding, inKind could incur significant losses. Moonesinghe acknowledges that early on, he faced challenges in accurately predicting credit demand, leading to substantial financial losses.

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The company has recently raised an additional $450 million, with participation from notable investors including Jay-Z’s MarcyPen Capital Ventures and former Yahoo CEO Jerry Yang. This marks a significant shift from inKind's early days when Moonesinghe struggled to attract outside investment. He attributes the current investor interest to a relationship-driven fundraising approach, which has allowed inKind to maintain ownership control, with the founders retaining over 75% of the company.

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Despite the innovative financing model, Moonesinghe emphasizes that restaurants must manage their operations effectively to cover costs beyond food expenses. He believes that the traditional restaurant funding model would not have been sustainable for his own ventures, stating, “If I had opened my restaurants in the traditional way, I wouldn’t be making any money on those restaurants today.” This perspective highlights the necessity for restaurants to adapt and thrive in a competitive environment.

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While inKind's model has garnered significant support, it has not been without criticism. Some skeptics question the sustainability of relying on discounted credits and the potential for restaurants to overextend themselves financially. Moonesinghe acknowledges these concerns but remains confident in the long-term viability of inKind's approach, focusing on building lasting relationships with both investors and restaurant owners.

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Looking ahead, inKind aims to expand its platform to include over 10,000 restaurants, further solidifying its position in the restaurant financing landscape. Moonesinghe's long-term vision prioritizes the success of the restaurants over quick financial exits, allowing for a more sustainable growth trajectory.

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• “In the first year, I lost 50 percent of the money that I funded to restaurants because I didn’t know how much credit to buy,” — Johann Moonesinghe, CEO of inKind

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• “These guys really understand us. They understand the brand we’re trying to build. They’re great investors and super well-connected. They love wine, I love wine. So we ended up creating a relationship,” — Johann Moonesinghe, on investor relationships

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• “We don’t need an exit. We don’t need to quickly get out of deals. For us, if we can help the restaurants do well and make money for their owners, even if a deal is taking us longer to sell their credit, that’s okay.” — Johann Moonesinghe, on inKind's long-term approach

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