Bengaluru-based start-up Dazo has decided to wind up its operations less than a year after inception. The firm is the latest in the line of food tech start-ups to quit the space or roll back operations as funding gets harder to come by.
“We were scaling up and were looking to get into more cities, but were short on capital. At some point we felt we were lagging behind other players and decided to quit,” said Shashaank Singhal, chief executive of Dazo.
Dazo had raised an undisclosed amount of funding in April from Google India chief Rajan Anandan, Amazon’s country manager Amit Agarwal, Commonfloor founder Sumit Jain, TaxiForSure founder Aprameya Radhakrishna and former FreeCharge chief executive Alok Goel.
The company started as an online restaurant or internet-based kitchen and pivoted to an aggregator of select restaurants.
Singhal confirmed that the team at Dazo will be working on a new product, but said it was too early to divulge any details.
Despite shutting down, Singhal doesn’t buy the argument that there’s a bubble waiting to burst in the Indian startup space.
“The market is in a bit of a lull, probably due to what’s happening in China. However, we don’t feel there’s any bubble that’s waiting to burst. Food tech is a capital intensive field, but I do think the market will bounce back in a few months and we’ll see a lot more funding,” he added
Just last week, Bengaluru-based online restaurant SpoonJoy announced that it was rolling back operations in the city and shutting down its Delhi operations. While the company did not comment on why it did so, running out of funds is the prime suspect.
Foodpanda, the restaurant aggregator now owned by Rocket Internet is facing challenges in building its business after its co-founders quit. Talks to sell the company’s Indian arm are apparently being spearheaded by top executives back in Germany.
The food-tech and the overall hyperlocal on-demand space is capital intensive. However, Singhal believes that a new breed of more frugal startups will emerge. “Early players like us were forced to invest on building logistics, but that’s no more the case,” he adds.
In the last one year, a plethora of hyperlocal delivery services such as Roadrunnr, LetsTransport, Delhivery that handle end-to-end logistics for restaurants, e-commerce companies, etc have emerged.
Food-tech and travel tech firms attracted large investments from VC over the past one year, however, many have found it hard to raise funding past the Series A round. Both sectors which were pitted as the next-big-thing after e-commerce in India are now being seen as victims of their own success.
Competition has pushed players to massively undercut prices, while the cost for customer acquisition is seen as being even higher than e-commerce in India.