There is no stopping the food business from growing exponentially: Piyush Goyal, TravelKhana

By: | Published: March 3, 2015 12:12 AM

Piyush Goyal believes in putting his money where his mouth is. That is why in 2013, the self-confessed foodie invested in TravelKhana, an online food delivery service for railway passengers.

Piyush Goyal believes in putting his money where his mouth is. That is why in 2013, the self-confessed foodie invested in TravelKhana, an online food delivery service for railway passengers. As managing partner of Delhi based investment firm Palaash Ventures, he believes that the Indian online food business has the potential to grow big and it is time that angel investors and venture capitalists (VCs) put their money behind these start-ups.

Goyal certainly knows how to place his bets. In the last couple of years, the relatively young firm has invested in online companies such as Voxapp—a mobile sampling company, SafeHarvest — a company that helps in production of pesticide free products, apart from Teewe—an HDMI Dongle which streams content seamlessly to the television via an application on the smartphone. Altogether, it has invested in eight start-ups, preferring to invest in ventures which are scalable and have a global value proposition. It goes for early stage start-ups, investing R1-1.2 crore ($165,000-200,000) in a start-up. In a conversation with FE BrandWagon’s Anushree Bhattacharyya, Goyal talks about the online food business in India, the kind of start-ups that VCs look for, and his appetite for big bets. Edited excerpts.

What explains the sudden rush in online food ventures? Investors, too, seem to be getting drawn to these experiments.

The rise of e-commerce itself is one of the reasons behind the success of online food start-ups. People now are accustomed to ordering and buying items online. The reduced cost of smartphones and the rising standards of living have expanded the size of this target market. Another factor is the rising number of restaurants, especially takeaway ones. Food business has much higher loan to value (LTV) ratio in comparison to cost of customer acquisition (CAC) which is the reason behind emergence of companies such as Foodpanda and Travelkhana.

The category already has many sub categories—from hotel/restaurant aggregators to aggregators who also deliver to niche food businesses such as ichef, iTiffin, etc. Which is the category that is doing well and has the potential to do even better, and why?

Executive meal categories, that is, niche food businesses which deliver food, will see immediate increase in scale. However, in the long term, the generic marketplace kind of model which has the technology to add any food category and deliver will grow tremendously.

What are the challenges for online food retailers?

Broadly, there are three challenges any online food business will face. To begin with, logistics in terms of timely delivery and optimising the resources will have to be taken care of. The next challenge in this industry occurs while integrating with numerous restaurants, since every online food business has to ensure the quality of service by training its people and also has to make sure that it receives its payments in time. The online food business will be able to not only overcome the first two challenges with the help of robust technology, but can also automate the whole value chain. But to get good technical skills for that will be the third and most difficult challenge.

What are the factors you keep in mind while investing in online food companies?
The foremost thing which we evaluate is the team – we see whether it will be able to excel operationally and scale the business. The second factor is whether the business model is easily scalable and has strong technology supporting it.

Most of the online food start-ups today are operating in metros and large cities. Does the business have potential in smaller cities and towns as well?
Absolutely. Tier2 and tier3 cities are very quickly picking up. In fact, the growth rates are higher in these cities as compared to the metros. We are seeing the same thing with Travelkhana – it receives a good number of orders from smaller stations.

While online food businesses have come up across the globe, they constitute a tiny percentage of the entire e-commerce business. What stops the category from being as big as electronics or apparel?
The food business is growing at a rapid pace and seeing a lot of acquisitions in comparison to pure e-commerce business. Global players such as Foodpanda are actively acquiring businesses across the globe. And we should not forget that we eat food daily but we don’t buy a TV or a mobile every day. So I think there is no stopping the food business from expanding exponentially in the future.

Which kind of online food businesses have been able to get funds from VCs? Do you see that changing?
Online food businesses that have drawn investments till now are pretty much in the news everywhere. Not to forget that all kinds of businesses
have got funding till now. We expect to have more investments in two categories in future. First, aggregators with good technology and delivery expertise will definitely draw more attention from investors. While niche online food businesses with their own kitchen and delivery too will grow but these businesses will not be much capital intensive.

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