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The Demise Of FoodTech Startups In India

The Demise Of FoodTech Startups In India
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You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

There was a time when you wanted to order something and you looked for the options among the various apps that provided you with the best discount. Forgetting the perpetual state of being broke in college, we ordered food in bulk and the bill wasn’t that much of a stress. It was convenient and cheap. These days, however, are slowly fading.

Our once flourishing food tech industry seems to be going through a draught. The situation has come to us searching for the operational ones, let alone a startup that offers good discount. Sure, Zomato and Swiggy are trying, but even Zomato faced its billion-dollar valuation slashed in half this month and Swiggy surged its prices last month to stay in business.

Year 2015 was the year when these startups were having a good time. Most of them were new and venture capital flew in like a flock of birds on grains. According to research firm Tracxn, venture investors poured $229 million into 431 food-tech startups in the country last year, four times the amount of money and number of businesses as in 2013. Now that this capital is drying up, many startups have seen their end. PepperTap, a grocery service backed by Sequoia and Snapdeal.com, shut down in April, following the closure last year of Dazo, a startup with financing from executives at Google and Amazon.

 TastyKhana, one of the firsts who entered this business in India got acquired by Food Panda. Joining this team is another startup called TinyOwl, which has halted its operation in all cities besides Mumbai. Calling it “temporarily discontinued”, TinyOwl became a pioneering Mumbai-based food-delivery app that raised $23 million from investors including Sequoia Capital and Nexus Venture Partners, and was operational in cities like Delhi-NCR, Bangalore, Mumbai, Navi Mumbai, Hyderabad, Chennai, Ahmedabad, Jaipur, Nagpur, Lucknow and Chandigarh.

Now that it has run out of money, according to a report in ET last month, it looks towards Roadrunnr, a hyperlocal logistic firm, to deliver food like Swiggy and Zomato. TinyOwl, though, wishes to make a comeback, and are retaining the user data to help them order after the company restarts its services in the future. "We are committed to return with an even better product for you in the near future,”the firm said a blogpost.

The reason behind this fall

Once the fashionable industry to join in, the trend is slowly declining. But this has nothing to do with the customers losing interest. With the eCommerce booming, consumers were more than happy to get cheap and good quality food.

This is a case of bad planning and greed for short term expansion. In the initial stages when many investors were interested, startups gave discounts with an open heart and made the service available at the nook of every street. One thing to keep in mind here is that these firms buy food at normal price from the restaurant and we get the food at discounted. The only money they take is the delivery fee which makes about Rs 50 per delivery. But in the haste to emerge out at the top, many firms exhausted their resources. If they were expecting customer loyalty in that short term, it would have been stupid. The customer went where they saw a better discount and investors saw what was coming. This became a recipe for disaster, delivered at their door step with at the cost of losing their ventures. Ironic, isn’t it?

Where once 100s of food tech startups lived, probably only 10 are standing there firmly. Among these too, many are facing intense valuations while others look for funds. The all you can eat buffet is over now. Or, is this the test of time where one has to eat the worst dish in the menu to get to the desert? We’ll have wait and watch!

Edition: December 2016

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