Why are Food-tech Start-ups Once Again Investors' Choice in India?

Are food-tech startups down and out in India already? The answer is no.
Entrepreneur Staff

At a time when investors’ confidence in the Indian start-ups ecosystem shook in post 2015, questions were being raised on the survival of market-sensitive sectors. Food technology being the worst hit saw funding slump down to $80 million in 2017 from an attractive $500 million in 2014.

Are food-tech startups down and out in India already? The answer is no.

The confidence exhibited by global giants such as UberEats and Google in the Indian food technology space is what was needed for Indian players to get their shot of funding. 

'India is Like Wild West Right Now'

In absence of strong players in the market, existing food delivery apps are making the most of the market opportunities.

Co-founder of Mumbai-based Lightbox VC Sandeep Murthy has told a media organization, "India is like the wild west right now." He said, "So many businesses have been serving such a massive consumer need in such a fragmented way. With the advent of technology, the sector is looking for firms that can deliver consistent, scalable value over time. Beyond pizza chain Domino's, India doesn't really have highly penetrative brands in its food sector."

To carve a niche in food tech space, Silicon giants like Google and taxi app Uber are swimming with the tide. Google launched Areo, a restaurant delivery and home services platform in early April while Uber followed suit on May 2, announcing its on-demand food-delivery arm UberEATS to be launched soon.

Investment On Its Way to Leading Food Apps

The domain has once again entered the good books of investors following the slump in funding in 2015-16. The South Africa-based Internet Conglomerate Naspers invested INR 512 crore on online food ordering and delivery platform Swiggy, marking the firm's second largest investment in Indian food tech space within a month.

Bengaluru-based Swiggy said they were looking to double their headcount, increase investments across core engineering, automation, data sciences, machine learning and personalization.

In May, Naspers injected $431 million in Delivery Hero, the German food ordering and delivery platform and Foodpanda's parent organization. FoodPanda, which is a notable player in food tech space, was acquired by Rocket Internet.

Zomato Investors' Choice Yet Again

Zomato, the sole restaurant-discovery and food ordering companies, has increased the authorised share capital in order to issue bonus shares to existing shareholders as part of a share capital re-structuring exercise. 

Fiscal year 2015-16 was not favourable for the company, despite the fact that it registered 2x growth in revenues. But, due to high burn rates, the company failed to meet expectations.

Currently, Zomato is following its expansion plans with new business models like cloud kitchen. It is planning to work in tandem with restaurant business owners to spread its roots further without paying fixed costs.

Ventures Which Had to Wrap up Operations

Unfortunately, 2016 has been a failed year for a number of small companies in food tech space like iTiffin, Dazo, Zupermeal, EazyMeals, Zeppery, BiteClub and Eatlo that had to bit the dust, after being crushed under heavy debts. Mumbai-based Tiny Owl failed to get its operations going even after raising funds from marquee investors like Sequoia Capital and Matrix Partners.

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