The latest developments in the food tech sector, and what it means for the startup ecosystem as a whole

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The latest controversies

Last Tuesday saw immense drama at food startup TinyOwl’s head office at Pune when co-founder Gaurav Choudhary was allegedly “taken hostage” by a few employees who had been laid off earlier. Though both TinyOwl as well as the “hostage takers” downplayed the incident in their versions to the police, the latter did admit that their distrust of the management regarding whether the fnf(full and final) settlement would be credited to their bank accounts caused them to take such a drastic step.
The food tech startup has been in dire straits for quite a while, with a significant number of job cuts having occurred in recent times, due to stress in the highly crowded food ordering market.

Structural problems abound

Over 100 employees were fired back in August, and further layoffs from Mumbai and Pune offices having occurred since. Given the situation at TinyOwl, a startup which raised a significant amount of funding from investors over a period of time, the question everybody is asking is : “Is there something wrong with the food tech sector, and the startup ecosystem in general?”
While India continues to remain a fertile ground for startups, it is also true that bubbles are developing in places-the hyperlocal segment,in particular, being one. A profusion of startups has not translated to a rise in the number of viable commercial models. Moreover, as entrepreneurs have repeatedly pointed out, getting the right talent is rather difficult. The overall scenario seems to vaguely resemble a rat race, with getting the “food tech” tag on one’s portfolio apparently being more important than setting up a strong base, which is conducive to expansion through innovation, and creating a resilient system which aims at benefiting customers in a novel way.
In addition to TinyOwl, other food tech startups, like Dazo, have collapsed, with their operations winding up less than a year after commencement. Even giants like Zomato have had to endure the taint of controversy, with founder Deepinder Goyal’s angry email to sales executives regarding missed sales targets getting leaked to the press. Zomato has also laid off over 10% of its workforce in recent times, in an apparent bid to focus on more profitable avenues.

What we think

India will continue to remain a hotbed of new, exciting startups, but unless their creation is accompanied by a corresponding rise in the number of viable, productive business models and innovative ideas, many of them will fail to fulfill their promise.