private boom v/s public gloom

how startups need to adapt in such a capital cycle (India)

August 2019

the India market is in a unique spot for early stage tech entrepreneurs, at least in recent history. with this post, I’ve attempted to explain the disconnects in the market, and a shared a few pointers for founders on how to navigate in the short-term.

public markets are cautioned by a slowdown in consumer spending across many sectors; banks & nbfc’s are going through a prolonged correction cycle; and between the India/Pak + USA/China + UK/Brexit geo-political complexities – there is enough caution in the winds globally.

Apr to Aug 2019 MMI data from Tickertape.in
relative scale legend: Green is Greed, Red is fear

here is some evidence: auto, garments, FMCG, real-estate.

what might this lead to? —> consumers will likely delay non-essential spends, enterprises will likely delay capex & try to reduce opex. effectively, purchases & upgrade cycles will be delayed. there are many spiralling effects to this which are unpredictable even to the most sophisticated market observers.

on the contrary, private markets (at least in tech) are at a new local-maxima of optimism. Seed & Series-A rounds are closing faster than I’ve witnessed in the past 5-6 years. Repeat/successful founders are raising outsized first cheques, and Series-B+ rounds are happening at rich valuations! … almost as if private tech investors aren’t even looking at what is happening in the public markets & the global macro.

to a large extent, I get why private tech investors do not worry about short term pessimism in public markets – they are backing entrepreneurs & ideas that will take shape and grow over the next 18-24 months – hoping things will turn for a positive very soon.

for Founders, here is what worries me

  1. when you raise capital, there is an urge to rack up costs – team, infrastructure, marketing, etc.
  2. one or two quarters in, you will start to feel the pressure to show “hockey stick growth” to your oft impatient investors
  3. in a negative sentiment cycle in public markets, there is little you can do to change that, despite our best intentions & strategies.

public market sentiment is a real-time reflection on the broader economy (beyond the tech bubble), and when/how that turns and what brings it back is an N dimensional multi-variate calculus problem. Ultimately, both markets are connected, and so when public markets are in crises, private markets won’t be left far behind.

as Entrepreneurs, what should you consider doing?

  1. manage your fixed costs carefully
  2. look for structural ways to extend your runway
  3. set expectations with your investors/board — have that tough conversation sooner rather than later (the good ones will be supportive/accommodating)
  4. get laser focused on quality metrics over vanity metrics
  5. some companies/products thrive in such environments, if you are one of them, double down and get more aggressive (but this is rare)

I don’t mean to be an alarmist, but you have to regulate your behaviour when the external environment has fundamentally changed – and for most of born in/after the 1980’s we haven’t really seen a true recession in recent memory. If we end up in one, don’t let that kill your startup!

(discount-led products/services could see an artificial surge in usage, but that could be a double-whammy to your burn rates & possibility of surviving the cycle)

thx to Mona, Tarun, Sai, Aakrit, and Soaib for feedback

BSE Sensex validates that Food Tech revolution in India is no bubble

Consumers have more choice, and Pizza is no longer the only preferred home delivery option

I read this article in the Economic Times yesterday, and realized that the food-tech sector has just demonstrated its real impact and latent demand on two public stocks (Jubilant Foodworks & Speciality Restaurants)

http://economictimes.indiatimes.com/industry/services/hotels-/-restaurants/restaurant-companies-like-jubilant-foodworks-and-others-lose-market-capitalisation-as-consumers-cut-on-spending/articleshow/51161671.cms

Performance of Jubilant Foodworks & Speciality Foods on BSE SENSEX past 12-months

“Delayed recovery in same-store sales over the medium term seems not just cyclical but also structural. There seem to be no signs of revival,” Abneesh Roy, an analyst at Edelweiss Securities

Roughly 36% of Jubilant Foodworks sales were via online ordering (OLO as they term it), which contributes to approximately — INR 800 Crores GMV (run-rate) in annual revenue run rate across Dominos & Dunkin Donuts in India & Sri-Lanka. (Keep this number in mind)

The structural shift spoken about by Abneesh Roy, isn’t a slow down in the Indian economy, or consumers cutting back on spending as some others have conjectured.

Consumers have a lot more choice today when it comes to where they order home-delivery food from. Thanks largely due to the Food-Tech Bubble as many perceive.


Impact of Food Tech investments

The past 18 months have seen a significant surge in the quantum of Venture Capital investments in Food Tech. Collectively, the sector raised $375M in 2014 & 2015 across 55 companies.

A whole host of new companies got created as a result. Food delivery marketplaces, Internet-First restaurants (or “cloud kitchens” as some call them), a couple of physical restaurant brands pivoted to delivery only, Recipe Boxes, Chef marketplaces, and many more.

The initial sampling and surge of orders was driven largely by deep discounts offered by the likes of Foodpanda, Tinyowl, Swiggy, Zomato, Faasos, Freshmenu et al. And lets not forget the discounts offered by the payment gateways as well; PayUMoney & Paytm splurged lavishly on this category.

This was followed by a round of crash & burn, consolidation.

The exuberance has left behind lasting & meaningful structural changes:

  1. More choice for consumers — beyond QSR’s & delivery chains. 
    you can order from a restaurant that doesn’t have their own delivery fleet
  2. New infrastructure — delivery-riders available “on-demand”
    quoting RoadRunnr — ‘book, track, and manage deliveries at scale’
  3. Digital payments, Menu discovery, Repeat Orders
    simple but powerful features enabled by a variety of apps

Based on a couple of articles, and my conversations with people in the industry, I conjecture that an average of 100,000 orders @ average order value of INR 300 per order are being placed through new Fo0d-Tech companies relying on the online/mobile channel exclusively. These orders are delivered from nearly 25,000 restaurants.

That is roughly 1095 Crores GMV in annualized orders. 20% more than an established mega-brand like Dominos & Dunkin.

Couple this with growth rates of category leaders in the range of 15% MoM, the category should double every two quarters.

INR 1000 Crores in GMV in a short 18-months is no small feat!

What the future may hold

While the Food-Tech exuberance raised a lot of eyebrows in past 6-months, it has created new-infrastructure that brings more choices for consumers, and enables a broader spectrum of Restaurants/Chefs/Homecooks to deliver their product to a mass audience.

my prospection is the following:

  1. Emergence of new “delivery only” brands at the scale of Dominos, Chipotle, McDonalds enabled entirely via the new Food-Tech infrastructure. 
    (Freshmenu, Faasos are already getting to some scale; we will see 10–15 more)
  2. Tier-2 markets will latch on to this phenomenon, the same way they adopted E-Commerce.
  3. Micro-entrepreneurship for good home-cooks will flourish. A new form of scalable livelihood for many
  4. Palette expansion for the mass Indian consumer — international cuisines become more accessible at lower price points
  5. At least two or three nationwide online Food delivery marketplaces will reach sustainability, and see a path to an IPO in 3 years from now
  6. Consumers will be willing to pay for “assured delivery” at peak-hours. We may even see some platforms introduce Surge-Pricing like Uber & Ola

The worst of the Food-Tech correction is behind us, the revolution will continue on, and it just demonstrated its impact on two large stocks on the BSE SENSEX.

Now, I am going to go order a Starbucks coffee from Swiggy!


special thanks to Deepak Abbot & monagandhi for reviewing edits

unexpectedly amazing customer service

how a wishful tweet was met with an amazing response by Grofers

late evening yesterday (March 18, 2015), I read about how Postmates had partnered with Starbucks to deliver coffee to anyone with a smartphone.

Postmates is available in the US, and doesn’t cover India.

I tweeted wishfully at Grofers & their founder Albinder Dhindsa

and a few of my friends agreed.

clearly there is demand!

what happened then was amazing!!

https://twitter.com/Grofers/status/578507421435346944

In less than 24-hours, they launched it !

tracking order status!

editing this post while enjoying the latte !

A huge thanks to the team @ Grofers

You’ve won me as a loyal customer for life!

mobile on-demand everything, is a pipe-dream no-more

mobile on-demand everything, is a pipe-dream no-more
it is present here and now.

today (Feb 25, 2015), i did the following between 7.30PM and 8.30PM IST

  1. hailed an Uber to get from office to home
  2. ordered groceries from Le Marche via Grofers App
  3. ordered a Chinese dinner from Asian Haus via Foodpanda App
  4. paid for everything with a stored credit-card (no cash)

pretty amazing!

great time to be a consumer, everything will come to you on-demand, anytime, anywhere.