Lets talk about F#@$

F#@$lets talk about

To clear the air,

F is for

Food..

Prelude

#Foodie4life would be a sure shot attribute of any

Indians. To put it more candidly, if you are not a

Foodie then your Indian connection is suspect.

So with a country like India where you have a

dish for every occasion, how come the new

breed of Entrepreneurs are finding it impossible

to get a foothold?

Food (without the TECH) is considered to be a

recession free industry but the ever increasing

body counts of failed startup paints a completely

different picture.

Who are we?

We put Technology to

work to Simplify life !

Over the last 12 months, VAYUZ has

partnered and mentored over a dozen

startups across various Industry verticals

but it was not until recently that we got an

opportunity to partner not one but two

Startups in the Food space.

Since we are responsible to build a

compelling and engaging product for our

customers, the research team @ VAYUZ as

a standard practice decided to dig in to

identify reasons behind the failure of

FoodTech Startups.

A disturbing analogy can be drawn between

#FoodTech and meteor shower, they look

beautiful when they enter the atmosphere, but

are shortlived and can leave a huge dent on the

impacted areas.

So let’s go through the next few slides to

understand reasons for continuous failure of

Food based Startups.

We are not a big fan of the term “FoodTech” and

we firmly believe that over emphasis on the word

“Tech” is somewhere responsible for the

downfall.

The F&B Industry – Market Overview

Restaurants

Pubs & Clubs15%

Take Out17%

Hotels 9%

Cafés 16%

Others3%

Organized F&B Market Breakup

India’s F&B industry is expected to

reach INR 3.8 Trillion in sales by the

year 2017, expanding at an average

annual pace of 24%.

In 2014 and 2015 combined,

around 55 start-ups in Food

segment raised approx. $373

Million (Rs 2,450 crore) from

investors.

Q1 & Q2, 2016 have seen more

than $70 Million in investments in

the Food segment.

1985 1995 2005 2015 2025

Indian Food Consumption accelerating over next decade

INR Bn

The F&B Industry – Recent Scenario

Despite raising many millions in funding

a few popular Startups in Food segment

like PepperTap, Spoonjoy, Langhar,

Eatlo among others gave up their share

of the pie.

So, what went wrong ?

Here is an INSIGHT to reasons, which might

have triggered this MESS.

Even after so much hype and positive finding from

the analysis of research firms, things didn’t work

well for all.

There is not one mistake that leads to a startup

failure rather a bouquet of thorns clubbed together.

The Domino Effect !

Operational Slackness, 34.4

Financial Mismanagement,

Incorrect Market

Analysis, 20.7

Customer Retention, 6.9

Lack of Technology support, 6.9

Reasons for startup failures

Source: YourStory

We infer 5 broad

reasons, based on

these statistics ..

#1 Operational Slackness

1. Focussing more on “Delivery on time” than on “Quality”.

2. Spreading too fast and too thin.

3. Wrong Team Mix and sometimes inexperience of founding team.

4. Unable to deliver on the volume of orders - Getting 100+ orders

a day is easy but managing the preparation and deliveries of these numbers is a

challenge.

5. Ignoring customer feedback.

#2 Financial Mismanagement

1. One of the major reasons has been the inability to raise a second stage

funding which results in eventual shutdown.

2. Mismanagement of Funds, spending in the wrong place. Never loose money,

Beware of little expenses.

3. Over emphasis on raising money – a big distraction element, taking focus

away building THE RIGHT REVENUE MODEL.

4. Inability to keep track on realistic numbers.

#3 Incorrect Market Analysis

1. Building and showcasing the wrong

“Selling Proposition”, when its food the

proposition has to be “FOOD”.

2. Canibalisation of the system by offering

“free free free” offers.

3. You know its wrong when you are trying

to create a market.

4. Driven by competition instead of

focussing on “What a customer wants”.

5. Ill-fit marketing and branding strategy.

#4 Expansion vs Retention

1. Greater focus on expanding

exponentially both physically and

digitally (APP Downloads) than

Customer Retention.

2. Over emphasis on acquiring new

customers and ignoring the current

3. Absence of a strong community

culture in the ecosystem. Lets not

forget its food and people like to talk

about it.

1. Obsession with the word “Tech” than “Food”

has been the story of FoodTechs. More time,

money and other non-renewable resources is

spent in developing the app / platform rather

than focusing on quality of service or menu

range or customer retention.

2. #Beinghuman is the way forward when it

comes to food, customers want human

intervention along with personalization.

3. Missing customer centric element in

interfacing technology like Website or Mobile

#5 Technology over Service

FoodTech

Forget the TechCustomers care about

THE FOOD !

A little about startups, in the

segment, that have gone empty

stomach ..

Founded in 2014 by Sai Priya Mahajan and

Rahul Harkisanka, EATLO - a food delivery

app prominsing the users to get ‘quick and

hassle free food from the best chefs’ halted

its operations due to the lack of funds.

DAZO - an internet-based kitchen, founded

by Shashaank Singhal and Monica Rastogi

pivoted to be an aggregator of select

restaurants. The Startup shut down due to

lack of funding and premature expansion,

despite raising an undisclosed amount from

7 investors in April, 2015.

SPOONJOY the Internet-first restaurant

founded in 2013 by Manish Jethani,which

counts Sachin Bansal and SAIF Partners

as investors, until recently served 1,500-

1,800 orders a day in Bengaluru. The

startup unfortunately had to pause its

operations in Delhi and parts of

Bengaluru due to operational pressure

and limiting.

TinyOwl, a Mumbai-based startup,

founded in 2014 by Harshvardhan

Mandad finally merged with logistics

player RoadRunnr. The reasons cited are

high cost of logistics and a oversaturated

market.

Big players too are feeling the heat

Zomato, founded in July 2008 by Pankaj

Chaddah and Deepinder Goyal is a $1 Bn+

restaurant discovery portal laid off around

300 staff of its current workforce in order

to cut costs in weaker parts of its business

and shift more focus into revenue-

generating areas like reservations. We call

it OPTIMIZATION!!

Food Panda, founded in April 2012 by

Ralph Wenzel and Rohit Chadda, a Rocket

Internet backed venture too ended its

doldrums with the Indian unit raising $22.4

Mn recently.

InnerChef, founded in April 2015, by serial

entrepreneurs Rajesh Sawhney and Sanjeev

Singhal has acquired two food tech companies –

Flavour Labs from Gurgaon and EatOnGo from

Bangalore. With this InnerChef has entered the

mobile kitchen space. Recently raised $2.5 million

in funding from Japanese fund Mistletoe.

JollyFoodFellow, founded in 2015 by Rajiv Sharma

and Niraj Harlalka, provides food entrepreneurs

analytics-led engagement and loyalty programs

on its platform.

FreshMenu, founded in 2014 by Rashmi Daga has

The situation is not so gloomy after all !

Big Opportunity

The scoresheet doesn’t look too great but general sentiment is still optimistic but no longer blinded. THERE IS

STILL NO LEADER…which means that this segment is still a greenfield pasture.

Thanks for the read, hope you found it interesting. And yes the “F” trick was to grab your undivided attention.

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At VAYUZ Technologies, we bring a fresh perspective into product development by designing and creating

solution based on market intelligence and TAG understanding. We help startups to translate their vision into

sustainable business model and build SUCESSFUL BUSINESS. Our founding team has a prior experience of

executing India’s 2nd most over subscribed IPO and also building a funded Edtech Co. Our across industry

customer base further gives us an unparelleled insight and definitive edge.

So give us a shout if you are planning a startup or thinking about a mobile app or trying to figure out a solution,

we would be happy to HOST you.

PS: Our coordinates are mentioned below.

Lets talk about F#@$

Food

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