Case study: A subscription-based meal delivery startup– Part1 – Introduction

Insights from Working as Technology Partners with Startups

A bright idea, passion, dedication, hard work, right market – what more do you need for success, why startups fail, or the mistakes they do? As technology partners with experience working with many startups, we have witnessed firsthand the pitfalls that can lead to failure, and how startups success rate can be greatly improved by avoiding these pitfalls.

This case study covers most of the startup mistakes and despite a viable plan how it failed, and how it can be recovered!!

The business concept: In UAE, there a significant portion of workforce consists of expats. Most of these dine out during lunch hour. So, the idea was to give a platform for subscription-based meals – a weekly or monthly subscription for lunch, dinner or both. They would deliver meals every day on time.

This meal delivery startup tied up with various restaurants, and the restaurant would directly deliver meals to the subscribers who get discounted prices, while the restaurants get committed business. This was a win-win situation.

The founder – Deepak was self-funding the business.

The first mistake! Wrong technology partner/ Tech stack

To make the idea work, you need a website and app. Most startups who are cash strapped would make this mistake of going for the cheapest and quickest option, that promise faster delivery, without even knowing what all is needed to make things work.

In their struggle mode, it is easy for startups to miss simple checks for Tech Partner like –

• • Is there any history of building serious systems?
  • Are they aware of risks, security aspects?
  • Does the Tech team ask questions, grilling you to the remotest use case, to leave no stones unturned?
  • Is there a good understanding of the business?
  • Is there a thought for future proofing/ conducting competition analysis?

Anyway, the mistake was done, going for a quick and dirty solution. It seemed like the system was working, and then it began to break. Number of issues, bugs, unforeseen scenarios – it was hell!

Now starts the wake-up call stage. Deepak started asking around for a reliable Tech partner, and a common friend contacted us.

Deepak found us, ‘Mechsoft’! We took an overview of the system.

Attempt at salvaging the current mess: To be honest, this has rarely worked for anyone. But it becomes really difficult not to take the request ‘Can we do something with the current code?’

After grappling with the most unstructured/ undocumented application, with no architecture plan, for some time, it was agreed that we start afresh.

The technology actually works!!
We got the portal/ business working. We were extremely lenient with Deepak, with payment terms, knowing that he sold his house to support the business. (So, the key aspects we look for – *full commitment* was there)

Here comes the trickier phase – going to the market – the execution. We have seen many businesses fail due to improper execution. If marketing is not smart enough, maybe you will grow at a slower pace. But bad execution can collapse the business.

By this time with marketing and execution costs – the funds were again drying up. This is where a startup desperately looks for investors.

This online food delivery platform had such a good business model – what could be issues with finding investment?

• • Not being able to create a very convincing & powerful story/ presentation
  • It’s too late to start looking for investment. This should have happened much earlier. Not like digging a well when you are thirsty. This makes you desperate.
  • Out of this desperation, there was heavy reliance on agents who would try and bring investors.

Now comes the second mistake! Accepting inadequate investment. (Another important reason why startups fail.)

Out of desperation, Deepak agreed to a small investment of 1 million Dhs (something like 275 K USD) giving away majority share. The agent tripled his commission at the last moment, and unfortunately Deepak accepted these bad terms.

As I mentioned earlier, execution is the key. With whatever funds, how do you plan your execution?

As soon as funding came in, the startup  hired employees for everything, for reaching out to restaurants, for drafting emails and follow-ups, for tele calling etc. Our strong recommendation was – that you personally do as much as possible and keep the minimal staff.

They started advertising – on local radio stations and some other channels. There was excellent traction. There were hundreds joining every month. Total registered users crossed 3000! Around 100 restaurants were onboard. There was excitement!

So, the business should be thriving, right? But unfortunately, the numbers were not that encouraging.

If there were hundreds subscribing, there were hundreds dropping out every month.

Relying heavily on employees – the startup missed out this key point. Feedback! We told Deepak – please look at the reviews.

The reviews told us the biggest issue. People liked the food; they liked the quantity. But soon became bored of having exactly the same kind of food every day.

We offered some very innovative ideas for the system.

But in a meeting, Deepak and his investor told me, we should stop technology expenditure now, we are  an online food delivery platform and should focus on marketing and sales.

Here comes the most important lesson for startups.

Knowing ‘Who am I’, of the business. Realizing what your actual business is.

In my spirituality / yoga/ meditation classes, I stress upon the point, that unless you know yourself you can’t find true happiness!

Same goes for the business as well.

So, I explained –

• • Do you produce food? No! You rely on restaurants.
  • Is your expertise delivery? Do you have a logistics engine? No! You rely on restaurants or third-party support.
  • Any restaurant could contact your customer directly and take away the business.
  • Any established food delivery platform can copy your business.

So, what are you?

You are a technology platform, offering commitment to restaurants and great deals to customers.

And if you are a food tech startup  – You must keep innovating to stay ahead. If you are not ready for this, do not get into this business!

(If any business is looking for this soul searching – knowing what exactly their real existence is, and importance, they can book a free – no obligation consultation with us.

Big mistake – Our innovations were not accepted, and the startup kept burning cash on advertising. Also, they kept trying various other ideas. (Other than what we suggested!)

Why? At a later stage when things were collapsing, Deepak confessed the reason, My business, I wanted to run with my ideas. And this brings us to one more mistake that startup founders make. Rigidity, not accepting or wanting to acknowledge other’s contributions. They think ‘My baby! How can someone dictate, how I should raise it?’

Anyway, the funds dried. There were some good opportunities in business (yes, despite all these issues, there were chances of growth) but the startup did not manage additional investment to support these opportunities. One has to run one’s own house as well, and various pressures start to mount. Finally, the business was wound up. But – is it over?

So, Deepak – a great human being, honest, dedicated, had correct business idea and the right market to start with, tried hard but could not cross the chasm and had to pause the business.

Way forward!

Meals Delivery in UAE – An idea case for startup revival. We strongly believe this business would thrive if handled correctly. In fact, the need and the feasibility have already been tested. The only question is to run this efficiently and profitably. We are open to rebuilding it, with the right team and support, and making this into a great business model.

A model that can be scaled, exported to various parts of the world, licensed to different sectors, or just be sold to a larger platform!

To summarize, here is the Startup success formula, from the Tech partners viewpoint- why startups fail.

1. Work with the right partner: There are many mistakes a startup may make, like trying to build own team for technology, or going for the cheapest Tech team or freelancers, For the team one needs to look
   • The partner’s success history
   • Can you trust the partner?
   • Is the partner ready to get involved in the project in full depth.
   • Understanding of business/ competition and future possibilities.
2. Do not get into a trap of inadequate investment: Inadequate investment is a sure shot way of reducing chances of success, in spite of all other positive aspects. In fact, I believe many investors make a mistake of making smaller investment (thinking it is a great deal) and then greatly lowering chances of the investment to do well.
3. Understand the ‘Who am I, of the business’: Realizing “what is your main business in the whole game”, is vital to be able to focus right, and succeed.
4. Keep innovating: It is a fast world. Things keep changing, competition will always be there. Never stop innovating even if your current model seems to be working.

If these things are taken care of, I am sure many more startups with right idea and mindset, will be able to succeed.