Questions

We're an early-stage food delivery startup. Should I start looking for funding on a service that has been proven successful by other companies?

I'm making a food delivery company that advertises the restaurant's products. This has been done many times over with different companies throughout the years (grubhub, doorstep delivery, eat24, etc.) the majority of them are making million's per year and it seems like it would be a home run. What we've done differently is that we have been able to market the restaurant's with full picture menu's, video and banner ads across our website and various forms of social media. Even though we don't have much traction yet would this be justifiable enough to investors to pitch the idea.

5answers

Two key issues in your question:

(1) when you say "majority are making millions" you're not seeing the hundreds of startups that failed in the same space...

(2) if it's such a great idea, you should have traction.

CHALLENGE:

Adding photos to menus is tricky... Good pics are very expensive, and bad pics will detract from a menu's appeal. I could let a restaurant owner fax me a menu and get it online for around $2 using offshore labor for data entry. But a good photo shoot would cost hundreds or more and require local talent everywhere (or place a large and expensive burden on the restaurant owners).

It's also labor-intensive to get thousands of restaurants signed on to something. Are you planning to scrape other sites and spam restaurant owners? Walk door-to-door? Buy a mailing list? If you've been personally soliciting restaurants, that's useful for market research - but obviously can't ever be profitable. You should test a scalable strategy for acquisition. Remember, a menu service that has only 30% (or even 60%) of the restaurants in my neighborhood is pretty much useless. Can you acquire them all, cheaply? Do they even want photos of their food? Only restaurants like McDonald's, Cheesecake Factory, and Chinese take-out do that these days.

To earn investment dollars, you'll need to prove: (a) you can execute this concept at scale, on boarding hundreds of restaurants, (b) restaurant owners are signing up, and (c) you're able to gain sufficient traffic to the site for the business to generate ongoing value.

RECOMMENDATION: prove yourself in one city, and investors may help you to expand to many. But if you want funding to pay for initial marketing / webdev / photography while you "gain traction", then that would be a wasted effort. Investors need to see scalable proof, and since fund-raising is time-consuming, better to invest your own energy in proving the business first.


Answered 4 years ago

I am not sure if your current differentiation from the other existing players is enough to set you apart. If you believe there continues to be a huge supply-demand gap, then even if you were offering the same service, execution can become the differentiator in getting a piece of the market. For example, guaranteed, faster delivery time than the others, wider range of restaurants, etc.However, if the landscape is too crowded, then identifying the one or two key gaps or needs, (product-market fit) in the existing solution providers and positioning your company as the one that addresses them may be a better approach. For example, there are many such well funded food delivery companies, here in Bangalore. One of them, also well funded and doing really well, set themselves apart, by moving away from restaurants and offering a daily-changing "fresh, healthy menu" of "home-cooked" food, with nice pictures and descriptions, backed by an excellent delivery service (execution).
I am a serial entrepreneur, currently advising multiple startups and will be happy to chat with you.


Answered 4 years ago

I would recommend to get traction so that you pitch your investors..
-What type of capital you need to run your operations? explain more
-If your differentiating point is images and videos start working on those and social media advertising. Work with restaurants, collaborate to a special dishes, chef videos, chef recommends, etc...engage customers to collect more clicks
- You need to work on a very thin profit margin for traction.
-You need to be the best friends of restaurants/local businesses


Answered 4 years ago

Not just yet.

Given the funding climate (extremely cold) for both food companies and delivery services - the most important element is proving worth.

Revenue, organic/sustainable growth, and unit economics will be the three biggest things investors will care about the most.

Making money in the food industry is easy. Turning a profit is incredibly hard.


Answered 3 years ago

Yes, you definitely need funding, since the food delivery space is a race to the bottom with heavy players already in the space.

This is bad one the one hand, good on the other, because you can raise money on this if there are a lot of people doing it. That means, there is money in it.

HOWEVER. I would not do it in a country, where a big player is already present, you simply can't win. But, you can do it in a country, where there isn't. Would it be possible for you to make it work in Chile, Austria, Serbia, Romania, Belarus, Lithuania, maybe China, Japan, Korea, Australia, Kenya? Many of those are beautiful countries, with completely untapped markets that are just waiting for a player to grab them. It just takes some time to readjust and move to another country, which most founders aren't willing to.


Answered 2 years ago

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