Food delivery startups are a dying breed!

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Sitting on the bleachers and commenting on the game may seem like a fool's errand, but it's something that allows coaches and fans to see the larger picture of the entire field. From the outside, I can see why many 'food-tech' (you'll see why it's in quotes later) companies have failed in the recent past. Of course, some of them may have succumbed for reasons more personal or internal, but in a broader view, the issues dogging this sector have common parameters of failure.

Defining Food-tech as a concept

I am fastidious when it comes to using words. As much as possible, I use and I want others to use the right words to describe their ideas and so when I hear, "food-tech", it gets me shaking in my boots. Adding the word 'tech' after a noun doesn't make that a new line of industry and so, food-tech isn't anything new, and in my belief, anything great. Let me elaborate.

What's the name that comes to your mind when you think of food-tech? Swiggy? Foodpanda? If you did, the good news is that you are like a majority of the people out there. The bad news is that you are wrong.

Swiggy (and the likes) are not in food at all. They are in logistics. Just like Amazon is not in merchandizing, but in logistics. And just like Amazon, Swiggy is in the business of creating a framework of supply-chain for food deliveries.

Source: Shutterstock

When I think of food-tech, I think of rotimatic.com, a company that's (for years) developing a machine that can create food. Or I think of Vinturi, that created a device that uses scientific and mechanical principles to aerate the wine as you pour it in a glass. These are a marriage of food and tech. Converting menus and enabling tracking of your food parcel on your phone is not.

A logistics company without logistics?

One thing a new breed of food-logistics companies are doing is learning from the mistakes of the previous generation. The lack of understanding led many of the older generation companies to believe they were in the food business, while they were clearly in the logistics camp. This misbelief caused them to ignore building their operations and rely on other companies to actually take care of their deliveries (logistics). It's like outsourcing what was outsourced (to you).

Heavy dependence on logistics companies to deliver the food that you promised (your customers - the restaurants and their customers - the patrons) you'd deliver, is what caused most of these companies to fall short and die. One of Spark10's cohort companies failed exactly because of this reason.

Faasos is a company that is trying to do things differently. They own the kitchens and they own the logistics-chain. And so are controlling everything within bounds. No more reliance on others to make the food or deliver it. And no more touting that you do either when you clearly don't. Technically, they are not a food tech company, but they are a food logistics company that's doing something right.

Someone dumbed it down!

If my arguments seem reasonable (I had to do my best within word limits) and logical, why on Earth are people calling it 'food-tech' when most of the companies are anything but? Well, the bulk of this misnomer lies with the investors.

The problem with most investors (including the giants) is that they are good at one thing - making money based on some good decisions, but bad at everything else - like understanding someone else's business. And so, I am guessing the earliest thought process of the investors in this sector would be something like this:

"Hmmm, should I invest in this business? But what the heck is this business? They are not a restaurant? And they are not like FedEx? They are digitizing the menus and automating the processes involved? Hmmm... They are, I guess, in the food industry and they are using technology to automate stuff... I get it, they are a food-tech company (hallelujiah!)!"

Why did the first wave fail?

Primarily, these companies failed because they bought into the naive (or perhaps even ignorant) investor's BS and believed they were 'food-tech'. Had they considered themselves as being in the logistics of food supply, they perhaps would have strategized better.

Secondly, aggregation sucks. Yes, it's nice for all of us to find one single list for all of us to get things, but the concept's novelty wears out soon. It was time for us to get our food delivered by one (or few companies), but once that's done, then what?

The trend in Indian startups is to aggregate and/or automate everything that is/was done manually. This is very similar to the early days of IT boom where you could get an "X Management System" made. Remember the days when you saw 'Hospital Management Systems', 'Video Library Management Systems', 'Attendance Management Systems', etc.? Well, this is like those times. Eventually, aggregation/automation will die, if not dead already.

Thirdly, eventually, people will see through all the BS. There will be copy-cats and because people like being loyal in the face of lack of novelty, there will be a clear winner who'll take a piece of the pie so big, that it leaves nothing for anyone else. Investors are sensing this and are no longer excited about this.

What can you do?

If changing your business or line of work is not an option, here's something you can do.

1. Find a niche. Go to markets that are not being served. Like small towns.
2. Be a market-place aggregator for things that are not being aggregated (like laddoos).
3. Stop deluding yourself with fancy words. You are a delivery guy with a lot of menus. Of course, unless, you are not!

I would like to hear your comments on the subject. Post your comments here or reach out to me on twitter (@raviwarrier) if you want to talk more. Cheers!