Food-tech start-ups have been under the scanner post start-ups like TinyOwl and Foodpanda saw a string of layoffs at their outlets. Industry experts believe that there are various challenges that have made investors cautious about this sector. Amid turmoil and speculation industry insiders believe the most important cause of concern is “margins.”
Padmaja Ruparel, president at Indian Angel Network says the three challenges in the food tech space are healthy food, logistics and customer traction. A restaurant has to change every 18-24 months, from ambience, menu and other things.
Investments in the food-tech have risen to about 229 million in 2015 from 66.8 million in 2014 and the number of start-ups in this domain has also more than doubled to 431 in 2015 versus the prior year, according to data provided by start-up data analytics provider Tracxn.
Navin Honagudi, Investment Director at Kae Capital said investors will firstly want to know how does the start-up differentiates itself from the existing chains, sustainability, how does it plan to build a brand and marketing strategies. Honagudi says food tech start-ups today should continue to focus on profitability. “Obviously everyone looks to increase market share but that should not come at the cost of negative unit economics and lower profitability.”
Anand Daniel, partner at Accel Partners said that Swiggy is unique in its end-to-end approach. From curating the best restaurants to suggesting the best dishes in those restaurants all the way to ensuring timely delivery of food with their on demand delivery fleet. They have streamlined the entire process using technology every step of the way, Daniel added.
Vaibhav Ali, founder and chief executive of Midnight Hunger says unit metrics or margins is the key concern for investors in the food tech space. Ali believes one must not go all out with funds. “You need to treat your investors money as your money.” He also said that people in this sector need to understand how to use their money wisely.” Investors concerns hover around scalability and how we are combining technology with the business, Ali added.“ I think the biggest question for everyone is what background do we come from, do we understand the hotel business, do we understand what it really takes to build a great restaurant.”