Business Models

What's for dinner tonight?

Sandeep Murthy
9th February 2015

As technology investors, we strive to find ways to use technology to make an impact in people’s lives. What better way than with everyday food?

India has 53 cities with a population of over 1 million. In comparison, the United States has 9 cities at this scale. India has a growing number of households that are now dual income. With this basic shift in lifestyle and growing urbanization, the Indian consumer is following a global trend of having less time to manage basic needs and is continuously in search of options to satisfy the simple needs. The result of this has been that companies like Domino’s and McDonalds’ have seen greater than 30% year on year growth in their businesses with same store sales at Domino’s growing at over 30% in FY12.

At the same time, the evolution of technology in industries in India is going through a very different trajectory than what we have seen in more developed economies. Changes are happening in parallel – growth in per capita income (moving a large mass of consumers from “needs” to “wants”), urbanization, organization of segments (largely through the Internet) and technology penetration are all happening in parallel. In the US, when Amazon launched they had the benefit of all of the organization that Barnes and Nobel, Borders and Walmart had put into the supply chain. In India the ecommerce pioneers are contending with building a supply chain, a logistics infrastructure, warehousing and even payment systems to enable organized retail. Add to these shifts the idea that business models are fundamentally changing as consumers have the chance to be “renters” or “subscribers” rather than “owners”. These parallel changes make the landscape for opportunity in India fundamentally different than that seen in other countries and also points to the fact that in many cases India will simply skip certain steps in the serial process that other markets went through. Faaso’s represents a unique opportunity to by-pass the old world model of quick service restaurants and jump straight to a technology enabled, app-driven platform of food on demand.

Juxtaposed against these macro changes are technology-enabled shifts in basic consumer behavior. In 5 years FlipKart has become the largest retailer in the country. Uber and Ola have changed how the masses in urban centers think about transportation. Faaso’s is changing the way Indians address a need that is faced 3 times a day. By servicing the need for food, Faaso’s is poised to be that must have “first page app”. What an amazing area to make an impact!

Over the past decade, the team at Faaso’s has lived and breathed the food business. They had their humble beginnings in the streets of Pune where they learnt the food business by setting up their first retail outlet. From that meager start, they have evolved and scaled a business that is a true technology company delivering over 7 million meals every year, largely through orders received on the app and web interface.

By moving from physical retail outlets to a restaurant on the phone, they have found that their repeat customer orders are extremely high (for customers there’s no longer a need to walk into an store… customers just have to open the app and they are in Faaso’s). This ease and simplicity has given Faaso’s the ability to generate revenues that are 9x their average customer acquisition cost. The company has done this by integrating data into their processes to the level where they can centrally change menus daily in any of their fulfillment centers that service 90 different localities around the country. With rent among the highest in the world, the company has opted to invest their money in technology to ensure that they can deliver customers high quality food, within 20 minutes to their doorstep.

As founder and CEO, Jaydeep Barman, says, “Our vision is to have consumers open the app, the same way they open their fridge, and ask ‘I wonder what Faaso’s has for dinner tonight'. We are excited to be participating in this ambitious vision and look forward to working with an accomplished team to further scale this new food experience.