This.cm shutting down

 

 

 

This

, the awkwardly named share-one-link-per-day platform, is shutting down at the end of the month, founder

Andrew Golis

announced over email to users and

in a Medium post

. The site,

launched in 2014

, had generated

some significant interest among media types

, having been invite-only for most of last year. It opened to everyone last fall and began offering automated,

curated email newsletters

. It recently added a commenting option, and had been exploring sponsorships as well as premium membership options; a new version of its app was

featured in the App Store

just last month, and Golis was

giving it a promotional push

just 10 days ago.

Golis explained in his announcement that the lack of funding and any indication of sustainability prompted the decision:

I’m tempted to make the explanation for that complicated, but it’s pretty simple: we worked ourselves to the point of exhaustion, struggled to raise money and just ran out of time. The site, newsletter and app are beloved by tens of thousands of people, including many of the writers and publishers I most admire. But we never got big enough to raise long-term capital or begin to build a sustainable business.

In the last few weeks and days, we’ve entertained a few very flattering conversations with other companies about bringing our work there. But none have come with the scale of commitment that would allow us to attack this huge opportunity with new energy.

And so we’re going to wrap this up in a way that’s best for our community and our team.

In the coming weeks, we’ll offer This. members a tool to export the links they’ve shared to the site. We’ll send around a list of companies and products and people who are building things we think This. fans should keep an eye on.

And I’ll finally give the mobs of people who have tried to poach them from This. the opportunity to snatch up Zeb Young and Mayukh Sen, our brilliant Directors of Engineering and Editorial.

The site was just last month announced as part of a

class of seven NYC startups in Matter’s accelerator

, and won’t be completing the program. As Golis writes:

In particular, I’m grateful to the folks at Matter VC, the incredible accelerator that has helped us in so many ways. One of our biggest disappointments in the timing of this is that we won’t be able to finish their extraordinary program and work closely with the impressive companies they do so much work to build. I would highly recommend this program to all media entrepreneurs and just wish the timing worked out better for us to take full advantage of this opportunity.

The platform found some market penetration among media types, and a number were distraught at the news, even though the demise of a consciously artisanal sharing platform wasn’t much of a surprise for some.

Six Mistakes Of TinyOwl, The Blue-Eyed Start-Up Child

 

 

TinyOwl, a Mumbai-based food technology start-up, is staring down the barrel of a gun.

The numbers tell the dismal story. Burning through Rs 2.5 crore a month on an average, it was only left with Rs 18 crore at the end of January. In the past 18-odd months, it had raised Rs 152 crore from various marquee investors and has now run out of options.

No investor is keen on funding the company, and no one wants to buy it. So, it has until June for its final hurrah - unless it can get funding or sell.

But how did the blue-eyed child of the start-up ecosystem get here?

The slide started in September 2015 when it fired 300 employees after over-hiring - a common mistake for start-ups.

The cracks were obvious when one of the employees, in her 30s, took a deep breath, composed herself and marched into a cabin, threw open the door and announced herself in a loud voice.

"How much money did you save when you fired me?" she asked Harshvardhan Mandad, the founder and chief executive officer of TinyOwl.

Mandad stared back, followed by moments of silence. "You know what? I don't care and neither do you," she said and marched out.

As the door closed, onlookers say Mandad was back to looking at his phone, as if nothing had happened.

It was one of those rare moments when Mandad was actually in the office. The IIT-B alumnus' primary job is fund raising. Operations, finance, marketing, human resource and technology are the jobs that are split between the other four co-founders - Shikhar Paliwal, Gaurav Choudhary, Tanuj Khandelwal and Saurabh Goyal.

The woman was one of those hired, interviewed personally by Mandad, after the company peaked at 2,500 orders in July 2015. The founders and investors were excited. For context, here's an example: India's biggest food tech brand, Zomato, does about 3,000 orders a day now.

The uncoordinated hiring, and subsequent retrenchment, meant TinyOwl's burn skyrocketed to Rs 8-10 crore a month. The discount game meant most customers kept coming back but there were no loyalties.

Money was running out.

Mandad approached investors from across the world. A few Germans were flown in. Everyone refused. Mandad then started approaching competitors to buy out a portion of the company in October.

Business Standard, at the time, had sent an email asking if the company was on the block. Mandad and Gautam Mago from Sequoia Capital, the company's lead investor, said no.

"Oh yes. Harsh approached everyone he could,'' said a former employee who was part of the "inner circle".

Sequoia, Nexus Venture Partners and Matrix Partners agreed to give the company Rs 52 crore but that was it, they said.

Make it last 12 months, the investors are learnt to have told the company.

TinyOwl had gotten a second lease of life. But how would Rs 50 crore or last 12 months when the burn rate was Rs 10 crore a month?

That is when TinyOwl made its second mistake.

In November 2015, it initiated a second round of cuts. Mandad was advised not to retrench so close to Diwali. But the cuts were announced.

Only the Mumbai and Bengaluru divisions were kept alive. The co-founders were sent to various locations. The hostage drama and the breakdown in the relationships between the employees and the founders are well documented.

Where was Mandad? No one is sure. Through the meltdown, he did not come to work. He communicated only through his phone.

The burn was now down to under Rs 4 crore. The money would last seven months, give or take.

But the orders, thanks to the bad press, were down to only 1,000 a day and TinyOwl wasn't discounting any more. Swiggy had taken over from TinyOwl.

Sources at Bengaluru-based Swiggy said they are currently processing more orders than Zomato.

That is when TinyOwl committed its third mistake.

In the first week of December, Mandad announced to his team that the company was going to launch a new version of TinyOwl. "Everyone was caught off-guard," recalls a former employee.

It was now going to do a dish-based aggregation system. If you open the app, it will tell you the dish for today is dosa.

The app would then give you options of where you could order from.

"There was hardly any artificial intelligence used. There was no data analytics," said an employee who helped develop the system. The listing business was to go on but the focus would be dishes. The pivot tanked with just about three orders a day as of two months ago.

Then, just before Mandad went on a three-week break in December, he made mistake number four - he hired a chief technology officer. Akash Saxena is learnt to have joined as CTO at Rs 1.5 crore a year and a joining bonus of Rs 50 lakh.

The investors, who had so far been hands off, were counting every penny now. So, around 10 from the tech team got fired, to convince investors that cost had not risen, said another employee.

At its peak, the tech team had 200, working on just the app. Now, it has 20. The total staff strength - once 1,100 - is now under 200. This is when Mandad remotely asked the Bengaluru office to be shut down. When Mandad returned in January he began preparation for mistake number five.

He started discussing another pivot: an area-based food aggregation, similar to what Grofers runs in grocery.

"In this, let's assume, you ordered roti, sabzi and dal. TinyOwl would get all three from different restaurants and deliver it to you," said an employee who recently quit. He had raised serious doubts over the scalability of the model.

In this business model, TinyOwl had to pay for the logistics of gathering the food from various restaurants. It would cost TinyOwl dear.

For the area-based food aggregation plan, more cash was required and all head of the departments were told to find new jobs.

"We asked him (Mandad) to make Homemade (TinyOwl's amateur chef aggregation business) the key focus. The only competitor was HolaChef and we could take them on," an employee said. Instead, Homemade, the only arm of TinyOwl that breaks even, was dissolved. That's mistake number six. Mandad and the investors initiated a valuation audit, which confirmed that the company was on sale. The hope, among the founders, is that the company will be absorbed by Zomato as Sequoia is a common investor. A few former employees said that Mandad had hinted Ola may be interested as well.

But these talks, too, failed. Reports emerged that TInyOwl maybe in talks with Roadrunnr in an all-stock deal. But the reports could not be confirmed.

Zomato refused to comment on the reports that TinyOwl had approached them looking for a buyout. Emails sent to TinyOwl, Ola and Roadrunnr did not elicit a response.

HSBC Slashes Zomato’s Billion Dollar Valuation By Half

 

In less than a week after Fidelity Rutland Square Trust II and Valic Co. marked down their stake in Flipkart by 20%, it is now the turn of HSBC’s brokerage arm to slash down the paper valuation of restaurant-discovery platform Zomato by 50% to $500 Mn from the earlier valued $1 Bn.  This is about half the valuation at which the restaurant search firm raised its last round of funding in September.

HSBC Securities and Capital Markets in a detailed report, titled ‘India Internet – Lot of Growth but Slim Pickings’ raised  concerns surrounding Zomato’s advertisement-heavy business model, growing competition in the food ordering space and money-losing international operations for the lower valuation. The report stated,

“Zomato is present in 23 markets so early on and none is profitable, which implies that to address both the investments in last-mile delivery and losses in international operations, fund-raising will be a continuous phenomenon, suggesting current valuations don’t make much sense. We do a discounted cash flow (DCF) analysis and value the business at 50% lower to the $1-Bn valuation.”

InfoEdge which holds nearly 50% in the Gurgaon-based Zomato and also runs sites like Naukri.com, 99acres and Jeevansathi, among others, however disagrees with the markdown. In a statement to Mint, Sanjeev Bikhchandani, founder and executive vice-chairman of Info Edge, said, “We respectfully disagree with several of the points raised by the HSBC report. Zomato’s “revenue has more than doubled in the last nine months and continues to head north at a good clip. Costs have been rationalized and burn is down by more than 70% from the peak. The company has plenty of cash and its unit economics are really good.”

Interestingly, in the same report, HSBC has also lowered the valuation of another InfoEdge investee company, PolicyBazaar, by 10% from the current $200 Mn.

However, the note by analysts Rajiv Sharma and Darpan Thakkar have a negative view and explain in detail why the brokerage firm affected the markdown. The notes say, “Competition will always find it easy to take share via other routes, particularly online last-mile delivery model. We understand that last-mile delivery is not easy but unless Zomato leads in this space it will find it tough to retain market share. Particularly, we have Swiggy in India which is very active in the space and has been getting funding at regular intervals.” As per the analysts, restaurants that pay for advertising only account for around 6-8% of Zomato’s overall database and the nascent online food ordering business will take time to develop into a strong revenue stream.

Meanwhile Zomato also disagrees with the brokerage firm’s negative view. Founder Deepinder Goyal has come up with a detailed blog post titled Unicorn Or Not in which he spoke about Zomato’s GMV, ad sales profitability, and refuted arguments made by the report.

The notable points from the post are-

• Our traffic in India, our home market, also grew 8% in April 2016 over March 2016.
• We are currently present in 23 countries, and we are the market leaders in 18 of them.
• We are able to divert traffic to transactions businesses (ordering, and table reservations) without any additional customer acquisition cost
• We hit 33,000 online orders yesterday – at our average order values, it makes us the largest player (and only profitable players on a unit economics level) by GMV (there’s a blog post coming soon about our food ordering economics).
• We already are profitable in the order business at a unit economics level, and the overall online ordering business will hit profitability when we get to an average of 40,000 orders a day. We should get there in the next 3-6 months.
• We are monetising the traffic in Australia already, and Melbourne and Sydney are already in the top 5 revenue generating cities for us across the world.
• We have significantly healthier margins in our ad sales business than pretty much anyone most people know.
• Our revenue has doubled over the past 9 months. Costs have been rationalised. Burn is down 70%from the peak.
• More than 95% of the restaurants in our core markets have yet to be monetised. Mobile, which is over 50% of our traffic, is yet to be monetised seriously – the new product which will be out before the end of the May will completely change the face of mobile app monetisation for us.
• Fifteen out of the eighteen countries where we are traffic leaders are yet to see serious monetisation efforts.
• We are aiming to hit overall profitability (without compromising on growth) at an overall company level in the next 6-12 months

Deepinder added,

“Nobody who knows our business has marked down our valuations. In fact, our existing investors are bullish about us, and are willing to back us further, if needed. And they have categorically said that our valuations are justified. Especially because we are more than doubling year on year, and the next year looks even more exciting for us. But external perceptions of valuations are determined by the state of the market, and the availability of facts to the person who is analysing these numbers.

In the last round, Zomato raised $60 Mn funding in September 2015, largely from Singapore’s Temasek Holdings Pte and existing investor Vy Capital, with the company being valued at about a billion dollars. The company, in which Info Edge owns about 47%, has raised about $225 million since inception in 2008. The markdown interestingly follows a spate of rough events at Zomato, which since the last year, has had to lay off 300 employees as it restructured its business, close operations in a few citiessuch as Lucknow, Kochi, Indore and Coimbatore, and even saw top talent leaving the company. The company ordered the food ordering segment in April 2015 last year and has been fighting it out with competitors such as Bangalore-based Swiggy and Rocket Internet-backed Foodpanda to gain market share in a category which has very high user acquisition costs.

Food technology sector has been witnessing a lot of churn with slowdown in funding and many startups either shutting down or getting acquired or downsizing as capital becomes scarcer. Case in point being food-tech startups Dazo and Eatlo which shut down operations last year and Internet-first kitchen Spoonjoy, which scaled down its operations in Bangalore and shut down in Delhi. Similarly, Foodpandareduced its workforce by 15% in December in order to move towards profitability combined with adjustments to its business model. Likewise, TinyOwl fired around 160 employees last year, shutting operations in four cities.  It is said to be in talks with B2B online service provider platform for hyperlocal logistics services Roadrunnr for a merger.

The battle in the food ordering space now looks limited to three players—Zomato, Swiggy, and Foodpanda. And if latest findings from Gigato, a mobile app and platform that allows app publishers to reward its users based on the data usage incurred on the app, are to be believed, Foodpanda dominated the food delivery space with 57 % people using the app to order food, followed by Zomato at 14% and TinyOwl at 12%.

Risk from formidable competition is something the report also stressed on. It said, “If companies in the online food delivery business, in particular, gain market traction, Zomato.com’s advertising business model could lose business. As a result, we think the company needs to develop a profitable online delivery business itself (and not outsource) at least in its top markets to complement restaurant search. This implies that Zomato.com will have to keep raising funds and investing for some more time to come, which would dampen profitability for a couple of years,”

In his blog post, however Deepinder allays these fears saying Zomato is far from done. He says, “ There’s something that we say often – “we are only 1% done”. We are truly 1% done, and if we continue to focus on execution, the noise will die down very soon.” It will be interesting to see Zomato’s 99% as the battle in the food ordering space intensifies.

Bangalore Based Fashion Etailer Fashionara Shuts Down Operations

 

Bangalore based fashion etailer, Fashionara, has shut down its operations. The company was founded by former Reliance Trends CEO Arun Sirdeshmukh along with Darpan Munjal, former chief technology officer at Times Internet Ltd, in 2012.

The company’s website is not working since last week and there has been hardly any update on the social media channels from a couple of days except from the automated scheduled tweets.

Co-founder Darpan Munjal had left the company in January this year, as confirmed by him. He is currently operating Squadhelp.com, a Crowdsourcing platform helping startups and businesses across the globe building memorable brands.

The company was backed by Lightspeed Venture Partners and Helion Venture Partners, and had raised over $4 Mn Series A. There were also news about the startup raising $7-8 Mn in year 2014 and shifting to a marketplace model from being a pure-play fashion portal.

Messages sent to Arun did not elicit any response, however, in an emailed response, Bejul Somaia of Lightspeed said, “Lightspeed exited its position some time back and are no longer an investor so we can’t comment on your email. Suggest you contact the company directly.”

The company’s net sales jumped five-fold to INR 32.86 Cr. in the financial year 2014-15. But its net loss widened to INR 32.13 Cr. from INR 21.11 Cr. in 2013-14.

It had a 25,000-sft central warehousing facility in Bangalore from where it ships out the products to key cities like Delhi, Hyderabad, Mumbai and Pune through various air and on-the-ground logistic tie-ups.

The portal was initially focused upon categories such as apparel, footwear and accessories. In early 2014, it introduced  F.Lea Bazaar, where it enabled selected sellers from the flea markets across the country to retail their products on its portal.

Later in 2015, riding on the wave of growing smartphone and internet ecosystem of the country, it came up with its mobile android app with the flash sale model. Flash Sales implied for sale events where limited number of products are available for limited period at deep discounts. Some of the brands that can be bought on Fashionara under these events included Red Tape, Von Dutch, Biba, Clarks, Twillory, Puma, Levis and many more.

In the same year, it also entered into the home furnishing market, along with Flipkart and Snapdeal, with the launch of 36 brands, 7500 products across 7 new categories.

It was competing with portals such as Flipkart, Snapdeal, Myntra, Jabong, Koovs, etc.

AskMe Sees Exit Of 650 Employees

 

AskMe, a hyper local businesses-focused internet firm, has seen resignations from 650 people across its 40 offices in India. Most of the employees who were let go were in the annual salary bracket of Rs 2.5 lakh-Rs 6 lakh.

According to sources, the company, which is backed by Helion Venture Capital and Malaysia's Astro, is running out of funds. Reports earlier suggested that AskMe's monthly cash burn was more than $6 million.

When asked about the resignations, the company said: "It's the beginning of the new fiscal year and we continue to increase our productivity across functions through automation and better processes as in previous years. We continue to hire talent where required."

Several AskMe employees told their annual appraisals were delayed this year. "We worked hard the entire year and we are let go without the pay we deserve," said an employee.

Some of the employees in Kolkata staged a protest. However, all they could get in return was a promise that their final pay would be released within a week.

Getit Infomedia (AskMe's parent company) has promised the employees they would be given a month's salary as severance payment. Some were told that they might get another job within the group or outside.

"Astro, which holds a majority share in the company, is seemingly no longer interested in funding Getit Infomedia," said an employee who survived the job cut. The employee said the last time Astro invested over Rs 150 crore in Getit, it had to jump through hoops but since then the group company has struggled to establish a foothold in the market. Helion has not shown any interest in doing a bridge round either. "The management has been shopping for other VCs but no one has shown any interest. More resignations may follow," an employee said.

Earlier, the company officials had told Business Standard, they were trying to raise $200 million from Chinese giants Alibaba and Baidu.

One of the reasons VCs have shown no interest is AskMe could be its foray into the grocery business, a source said.

AskMe grocery has a presence in 38 cities with 23 centres in Mumbai alone. It follows the Grofers-PepperTap business model of sourcing products from local retailers.

AskMe was in hot water recently when a furniture maker accused Mebelkart, a Getit Infomedia company, of defaulting on payment of Rs 28 lakh and selling brand imitations.

Established in 1986, Getit was a print-based classifieds company. Astro had made a significant investment in the company in 2010 and again in 2014. In 2013, Getit acquired AskMe from Network18. In 2015, it made two more purchases in the form of Bestatlowest and Mebelkart.

PepperTap Fate Shows Why E-Tail Can’t Live On Discounts?

 

Early April, a journey that started in thea summer of 2014, was about to end. Co-founders Navneet Singh and Milind Sharma decided to shut down PepperTap, India’s third largest e-grocer. They didn’t have an option.

PepperTap was losing money on every order due to discounts, which went as high as 70%, and there were no signs of profitability or more funding.

“Who will give $100 million? The investment climate has changed from what it was a year back. There is no visibility on the next round of funding,” Singh told HT, adding that PepperTap didn’t even look for more money. Not even from Snapdeal, which led PepperTap’s last funding round of $40 million (`260 crore) and hoped to integrate the business.

PepperTap wanted to revolutionise grocery buying – freedom from queues, no parking hassles and no haggling. It was simple— create a marketplace for people to order food online and Singh’s foot soldiers would collect the goods and deliver it within two hours. The plan, however, did not work to script (see box).

Singh could have moved to an inventory-led model from the marketplace model, which works well on scale and requires a lot of money, according to Singh.

Vipul Parekh, co-founder of BigBasket, thinks the other way. “Grocery can only be done if it is inventory-led,” Parekh had told HT earlier. Grofers, too, has shifted to an inventory-led model. Grofers has raised $120 million and Big Basket $150 million in their latest funding rounds.

Some companies, meanwhile, have adopted a tweaked marketplace model. Zip.in, a hyperlocal marketplace in Hyderabad, accumulates orders before noon, purchases them from wholesalers and delivers them later. “Aggregating orders gives us better margins,” said Kishore Ganji, CEO of Zip.in.

Before PepperTap, LocalBanya, Flipkart, Paytm and Ola Cabs have closed their e-groceries. However, Morgan Stanley estimates the sector can grow to $19 billion (`1.25 lakh crore) by 2020, smaller than only electronics and apparels. The report also cements BigBasket’s business model: “BigBasket turns inventory 40 times per year versus 7-8 times for an offline player and has 97.3% on-time delivery.”

Meanwhile, Singh has “a significant amount of money” from the last funding round in the bank. He will use it to build his new logistics venture. But, Snapdeal will have to find a new partner for its grocery dream.

PepperTap shuts down