Bengaluru: Food delivery start-up Eatlo Tech Solutions Pvt. Ltd has stopped operations barely a year into its existence. It is not immediately clear if the company has completely closed down.
Bengaluru-based Eatlo had raised about ₹ 6 crore in two rounds from Powai Lake Ventures; Abhishek Goyal, co-founder of start-up tracker Tracxn; and Haresh Chawla, partner at India Value Fund Advisors.
The company stopped accepting orders on 15 December, according to three employees at Eatlo, who did not wish to be named. However, none of them have been fired or given an explanation on the sudden roll back of operations.
One of the employees mentioned above said the company has money to last for two months.
Co-founder Rahul Harkisanka denied the company has closed down and declined to comment on its financial health.
“We have temporarily stopped operations and revaluating things. We are trying to figure out the next step. It is just that we are taking a break and revaluating. It is confidential as to what we are doing," said Harkisanka.
Eatlo was founded in November 2014 by Harkisanka, who had earlier worked with start-ups such as Freecharge, UrbanTouch and Fashionandyou and Sai Priya Mahajan, who also had stints with UrbanTouch and Fashionandyou.
The development comes at a time when investors are clawing back on investments, prompting start-ups to focus on reducing cash burn. The food technology sector seems to be one of the worst hit with early-stage start-ups shutting down after failing to woo institutional investors.
Internet-first kitchen Spoonjoy (Emvito Technologies Pvt. Ltd) and restaurant aggregator Dazo had shut shop in October after they failed to raise substantial funds.
Both Dazo and Spoonjoy had marquee investors under their belt. Dazo had Amazon India chief Amit Agarwal, Google India chief Rajan Anandan, Commonfloor’s Sumit Jain, TaxiForSure’s Aprameya Radhakrishna and Alok Goel, managing director at SAIF Partners as investors.
Spoonjoy was backed by Flipkart co-founders Sachin Bansal and Binny Bansal, Flipkart’s former chief people officer Mekin Maheshwari, Tracxn’s Goyal, Sahil Barua, co-founder of Delhivery, an e-commerce logistics firm and SAIF Partners.
While Dazo closed down, Spoonjoy was acquired by hyperlocal delivery start-up Grofers (Locodel Solutions Pvt. Ltd).
Too many start-ups jostling in a particular segment has prompted investors to wait and watch for a winner, experts say.
“There are too many people starting similar things. Many entrepreneurs are quick to shut one venture and start something else tomorrow. Since everybody is dragged into a race, people know 100 people will throw their hat in the ring and five will survive," said Harminder Sahni, founder at Wazir Advisors, a consultancy firm. “The sector has become so chaotic that you cannot blame investors for being cautious."
There are at least 179 food ordering and delivery start-ups in the country, according to Tracxn. As much as $150 million has been invested in the sector in 2015.
It is not only the early stage companies who are facing the heat of a slowdown in investment. Zomato Media Pvt. Ltd, the most well-funded local food tech start-up with about $223 million in its kitty and Sequoia Capital-backed online restaurant aggregator Tinyowl Technologies Pvt. Ltd, which has raised $20-million so far, have resorted to job cuts in the last two months.
Food tech start-ups have been faltering because of poor unit economics, which leads to high burn rates, experts say. The burn rate could be as high as $1.5-2 million a month for the bigger companies, as they spend on acquiring customers besides incurring costs towards delivery.