Last year, a host of startups delved into the on-demand food delivery sector, drawn by the large Indian market, easy funding from venture capital firms, and simple tech that goes into it. Competition among startups got heated, and a few of them were left struggling, unsure of their future. Some closed down or got sold for a pittance to other startups that managed to raise more money, and are better managed.
Faasos did not follow the usual model of expanding at breakneck speed and losing money big time. Instead of being a company focussing on delivering food from restaurants to customers, it decided to become a company where they have full control over food — from its sourcing to cooking and delivery. The focus on food made them among the most successful startups in India last year.
The company was founded in 2004 by Jaydeep Barman, who previously worked with consultancy McKinsey & Co. in London, and Kallol Banerjee, as a delivery-focussed joint selling rolls and wraps. It started on the road to becoming an internet-led firm in 2011, after received funding from Sequoia Capital India. And this year, it has grown multiple-fold, powered by $50 million in venture funding, according to data from CB Insights. It is targeting revenue of $20 million by March 2016, and expects that to grow five-fold in the year after.
Barman talked to DealStreetAsia about how he convinced investors that having control over food was more important than expanding at breakneck speed and burning cash, at a time when most competitors threw profitability aside and started operations in several cities and hired liberally. They quickly ran out of cash, and sold out or scaled back as fast as they had expanded. Barman also talked about how he regulates hygiene, taste and quality of food — from wraps and starters to desserts — across multiple kitchens in 15 cities.
Most of the so-called ‘food tech’ companies had a difficult time in 2015. But Faasos had a blockbuster year in terms of funding and expansion. What differentiated you?
Basically wee are a food company and not a tech company, and not a food-tech company, whatever that means. Food for us is the key differentiator. As long as we control its quality, the customer can depend on us. But for those who followed a marketplace model, there was control over everything except the quality of food. No company in the world can manage to do well in that manner. Even if this model means that we take longer to build it, we can actually deliver something endearing to customers. It is more difficult to scale, but also more difficult to copy.
How did you think about this model when the conventional wisdom from investors was to expand rapidly in the hope of becoming the market leader?
We started from a conventional food place, by setting up Calcutta Rolls, a small joint that focussed on deliveries that accounted for 80 per cent of sales. From there, we wanted to expand nationwide, for which the menu had to be broadened. But we were clear that we did not want to set up physical stores, and wanted to own the food we served. We did that. We operate our kitchens, either at a central location or the central supply chain.
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