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Food Start-Ups Feb, 06 2017

​Lack of proper business strategy, made the food startups drop from 46 to 4

A classic example, say experts, is the food technology segment, where startups struggle to compete with major players like Swiggy and Zomato.

By Franchise India Bureau
​Lack of proper business strategy, made the food startups drop from 46 to 4

The startup boom in 2015, saw mobile technology emerge as a promising business model, may have encouraged many to jump onto the digital bandwagon. But many segments in this space in Hyderabad are now marked by dwindling number of entrants and slowing fund inflows.

The reason: an ecosystem that has been filled to the brim with thousands of technology-enabled startups. A classic example, say experts, is the food technology segment, where startups struggle to compete with major players like Swiggy and Zomato.

Sanjay Enishetty, Managing Director, Hyderabad-based investor group 50K Ventures, said, "As the food technology segment appeared to be a lucrative market in 2015, too many startups entered this market. While a few managed to survive or get acquired, a majority of them had to exit the market after exhausting all their funds. This is because the startups had not built a sustainable business model or a viable product, which could survive in such a crowded market,

Sample this: While the country had nearly 258 startups working in the food order and delivery space in 2014, this number jumped to 610 in 2015.In 2016, the figure dropped to 138. The scenario is no different in Hyderabad where the number of startups in this space dropped from 46 in 2014 to a mere 4 in 2016.

Yuv Raj, founder, First Meal, said, "It has become very hard for a startup to survive in the food technology space. There are far too many players in the market and funding has also seen a lull since 2015. Without a sustainable business model, startups will only fade away in a market dominated by Swiggy and Foodpanda. This is why in spite of the plans I had, to expand my startup, agreeing to an acquisition was the smart thing to do."

According to Enishetty , many startups working in the 'edu tech' space have also had to shut down operations, after raising an initial round of funding. The number of startups entering this market in Hyderabad has also fallen from 10 in 2015 to 6 in 2014. A few point to this falling number, of new players in the market, as one of the first signs of a maturing startup ecosystem.

An insider said, "A significant increase in the number of startups followed by a sudden dip is a clear sign of maturing markets. The leading competitors start to command the major share of the market and any further change, if at all, will be gradual. The entry barrier gets higher and early stage investments dry up. New ventures are always better off focusing on sectors which are still nascent."

Related: ​Tyson Foods Inc. launches new venture to fund food and agriculture startups

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