Startup in distress – Seeking for the wisdom of the crowd!

By Krishna Chidambaresh on July 31, 2012 40 Comments / 6848 views

A few months back around December of 2011, a couple of guys felt the rush of adrenalin when they bumped into what seemed like a really exciting idea. The result was the birth of Yo! Potato, a food delivery service that lets you order food from ANY restaurant you want and not bother about minimum order or any other limitation. For the first time, we felt we gave the “ease” for people stuck with Pizzas when their taste buds are craving for something from that small Chinese restaurant in the neighborhood.

We were true to the principles of Lean Startup by not wasting away any time in setting up anything other than what was just required to get started. We setup a landing page in a day with the help of Kickofflabs and announced our launch in the most humble way on social media. The first month was mostly the 2 of us taking and delivering orders. We did just 17 orders. We kept growing and we crossed 900 orders last month alone. Some of the top celebrities used our service and we felt loved by everyone. We have received over 15 franchise requests in less than 3 months since our launch. People loved our blogs and newsletters. We were living our dream. The response was overwhelming. We got featured in all the top news dailies.

Many of our customers valued our service so much so that they suggested we charge them so they can order for even a cup of coffee, guilt-free. We did that with 30 days free trial in July and the response has been more than good so far. And then something happened. We ran out of money. We hunted a few friends who pitched in some but they dried up as well. All the VCs we talk to have just one thing to say – “It’s too early for us to participate”. We couldn’t find many angels and the ones we met were not as aligned to our vision as we hoped.

Now, the reason I am writing this is to reach out to all of you and take possible connections to angels who might find Yo! Potato interesting enough to consider investing. Also, we are consider raising small amount of money from a bunch of interesting people like you. Though our fund requirement over 2 years is between 1-2 Cr, we can do with small chunks to keep us going from one milestone to another. Our current burn rate is around 2- 2.5L.

Pls do get in touch with me if you can contribute. My email is krishna@yopotato.com. Thanks for taking the time to read this.

Krishna Chidambaresh Co-founder, Yo! Potato https://www.yopotato.com https://www.facebook.com/yopotato

Comments

Krishna Chidambaresh

40 Comments

Ramanuj Mukherjee July 31, 2012, 11:28 am

all the best!
Tejas Patel July 31, 2012, 11:48 am

What is your long term business model though? Are you taking a cut from restaurants apart from your customers? Not really responding to your request but want to get more insight.

Tejas
Vijay Khubchandani July 31, 2012, 11:57 am

I know somebody who is doing something similar in Mumbai.. Will try and talk to him to share some experience and advice on Angel money..
Sujoy Neogi July 31, 2012, 12:09 pm

Krishna,

The lean start up concept is designed to find a business model for which customers are willing to pay, in this case a major part of the business model i.e revenue, profit seems to be missing, you need to pivot and find a way which generates money, you may not need a investor rather investors would be queuing up when you find a profitable business model. I am sorry but what you have done cannot be considered a lean startup yet.
amiteshanand July 31, 2012, 12:34 pm

We help Entrepreneurs raise capital and build sustainable businesses. Let’s speak to see what you have and where we could help. Just send you an email.

Proudly Rodinhooder,

Amitesh
Krishna Chidambaresh July 31, 2012, 12:42 pm

Sujoy,

Thanks for the response. We apparently did follow lean startup and pivoted the major part of the business, the business model itself. When we started Yo! Potato, we made a “leap of faith” assumption that restaurants will see a lot of value in a service like this and will be happy to share healthy margin with us for helping them with more orders and also delivering them. That didn’t happen. The competitors apparently seem to keep dragging each other into a price war and the restaurants seem to go with the one who charges the least. On the otherhand, our differentiators are well developed with the consumers since no one offers benefits of unlimited choice and no minimum order which really does make customers’ lives so much more easier. We quickly realized the need for a pivot. Price and profits are proportional to the perceived value of the service and that apparently seems to be resting on the consumer front in our case. So, we radically changed the model and used the customer order data for the past 6 months when the service was free for consumers and have arrived at price points. We have done quite a bit of customer interviews and NPS to get there. Another example of our lean startup application is the number of split tests we have conducted just to optimize our landing page. We have iterated more than 26 versions of it before we ended up with the one that’s getting us the best results.Not that we are desperate for the “lean startup” label but we are definitely serious about what we do and how we use lean startup tools.

Thanks for the read and response.
Krishna Chidambaresh July 31, 2012, 12:57 pm

Tejas,

The long term business model is multi-stream revenues. Kickbacks from restaurants, subscription fee from consumers, Ad revenues. We apparently envision to make Yo! Potato an end to end solution for food ordering.

Thank you
Krishna Chidambaresh July 31, 2012, 12:57 pm

Appreciate it, Vijay. Any help will be appreciated!
abubucker.athick July 31, 2012, 2:33 pm

My rough math is you are spending Rs 225/= for every order delivered.

What has been you rate of growth M-O-M on Order volume ?

What is your average order size in Rs ?

At Present, your burn rate is way too high for the order volume. Unless, anyone knows how you are going to bring it down, it would be unviable as a business.
Abhik Prasad July 31, 2012, 6:10 pm

Hi Krishna,

Just curious about a few things which a potential investor might ask.

How is current burn rate of Rs 2.5 broken up (or what does it comprise of )

Are you now charging all customers or do you still have a free plan ?

Is the pricing in your current plan(s) operationally break even ? E.g. if you charge Rs 100 and are losing 10 bucks per order, then the problem potentially grows as you scale.

Are restaurants offering you a commission for deliveries ?If yes, how much ?

How many people do you have for deliveries and the average no of deliveries per person / per day ? Also how many in management and how many in operations.

What’s your delivery model like ? Its it a hub and spoke where your delivery person goes from your office to a restaurant(s), picks up the order, delivers it to customer(s) and comes back to office. And Repeat.

Or is it a star model where the delivery guys are based around different restaurant clusters, orders sent to them and they pick up and deliver to customers

Your current website is pretty basic ? How much of an investment do you see happening in technology in the near future ?

If you aren’t comfortable disclosing details in a public forum, you could probably send me an email at abhik@experiamedia.com

cheers

abhik
Pranay Srinivasan July 31, 2012, 7:46 pm

Hey Krishna,

Sent you an email. But to echo whats the common thread on the comments thread, is there a revenue model to get profitable off?

Also, have you considered memberships and offering a percentage of their memberships as a discount? Or charging a service fee to deliver?

Or to tie up with home-makers / house-wives who can become your kitchens? that saves you money from restaurants and offers you decent margins as well. Devise a menu and deliver within a neighborhood. Just need a cycle and a delivery walla and lots of phone followup.

happy to speak further.

Cheers,

Pranay
Sai Rodinhood Pothuri August 1, 2012, 4:13 am

I am sorry if i am being some thing rude . My Main thing is this ” And then something happened. We ran out of money ” because let me tell you few points

1) you are good with numbers

2) you are good with market strategy

3) you are good with customer and increase in customer level

if you are good with all above then y suddenly something happened and you lost all the money.. rather you might tell us what the wrong strategy lead it to empty the pockets or what ever the wrong finance you gone through that collapsed your earnings?

You can up with scratch and built some thing and lost the finance and look for some other money like VC or angel or what ever and if tomorrow the same thing happens the you respond like the same ” And then something happened. We ran out of money ”

My straight question is.. if your strategy is not good then you might collapse at early days of business but you came across good orders, good volumes, good customers who might give you more for small items like coffee etc etc then suddenly what happened? is it miracle or with bad strategy you followed and not willing to expose to people ?

Thanks

Sai
Krishna Chidambaresh August 1, 2012, 9:21 am

Hi Sai,

Thanks for asking those questions. When we started Yo! Potato, the model was a bit different. We were going to make a lot of money from restaurants and keep it free for consumers and wow them. We eventually realized that wasn’t going to work for various reasons including price wars which was going to get worse as more entrants come in, less differentiators between players from restaurant’s point of view, etc. The plan in the first few months was to understand the customer ordering pattern, figure out the top restaurants most orders go to, partner with them, make loads of money from those orders. But, since we offer customers to order from any restaurant, there’s always going to be a lot of restaurants they want food from that we don’t make money. Hence that model could have worked only if we get higher kickbacks from restaurants we partner with to compensate for orders that’s not going to make us money.This we figured was not going to happen from restaurants anytime soon.. The current model charges customers but retains all the differentiators consumers value. Since the new model fell in place only in July, it is going to take us a few months before we will see serious money.

Hope this clarifies.
Krishna Chidambaresh August 1, 2012, 11:05 am

Hi Abubaker,

Will be happy to send you some details on the numbers if you provide me with your email ID. Mine is krishna@yopotato.com. Appreciate all the support!

Thanks,
Krishna
Hemant Pulijala August 1, 2012, 11:21 am

Krishna,How many delivery boys you have?how much salaries you paying?how much money you spending on fuel and other expenses?Cuz,2-2.5 lakh burnout per month for a food devilery portal seems quite high.Are you adding you and your co-founder’s salaries too?
Krishna Chidambaresh August 1, 2012, 11:25 am

Thats inclusive of everything Rohit. The burn rate just for COGS will be around a lac. We have 10 riders, 2 order takers, 1 Business manager and 2 promoters. Thank you.
Sujoy Neogi August 1, 2012, 1:47 pm

I saw your facebook page which does say you have a good fan following, and i am sure you would get a investor soon, however just wanted to give a feedback which i hope you would take constructively, when you did the iterations i assume you were not charging people, this is a mistake because if the iterations are not showing how your sales is varying it is not of much use, because your life line or blood is cash and you need to measure it, the lean startup model says you need to find a model which makes money, you may have got users but not bulk customers who pay. Another thing is about the “leap of faith”, we should take leaps of faith but the lesson here is, your leap of faith here could have been verified without burning any cash, you could have simply asked the restaurant owners as part of your research 🙂
Ashish Kothari August 1, 2012, 2:01 pm

Hey Krishna, i guess you have landed up at right place. Just go across the blog you will find a recent post which is from a guy in US or UK and he is willing to invest in people like you even in small bits, he even has lot of his friends who are willing to invest. So may be this be of certain help to you and keep going buddy you will eventually figure out the right thing for you.

Rgds,

Ashish Kothari
Sai Rodinhood Pothuri August 1, 2012, 2:45 pm

Dear Krishna As Expected… Good and
Alok Rodinhood Kejriwal August 1, 2012, 4:38 pm

any movement on this??
Krishna Chidambaresh August 3, 2012, 7:07 am

Hey Alok,

Thanmks a million! I have been contacted by quite a few genuine Rodinhooders wanting to know more and possibly invest. This is the single most best result I have seen in my long time search for investors. Thanks again and long live Rodinhood! 🙂

Cheers,
Krishna
Alok Rodinhood Kejriwal August 3, 2012, 7:17 am

well, if it happens, then we should BLOW t
Deepak Shenoy August 3, 2012, 9:12 am

But you recover the COGS, no? I mean when people get the food, they pay you, right?

So the real burn rate is 1.5 lakhs? For 10 riders I assume it’s like 8k pm or such, and the rest as establishment cost.

Next, math on orders. 30 days in a month, 10 riders, 900 orders p.m. = 3 orders per rider per day? Even that is likely to be something concentrated on weekends etc. That’s very very little, no – why do you even need 10 riders? (Just something to think about)

Third, riders use petrol bikes? That’s gotta cost serious moolah. Why not use lunas/mopeds, or even bicycles (if you’re local)?

Let me be blunt. I think you’re way outspending and you’re way early in the process to get large funding, so it has to be a personal thing (i.e. someone trusts you, likes you and will fund you). For that, a forum like this will have stupid guys like me who keep poking holes, and which is not of great help to you. Let me assume that you find a godfather and get money, and offer you some suggestions instead.

a) Get to a location where there are small offices and offer lunch menus of local or other restaurants (non ala-carte) in a simple one pager, for delivery. Avoid shops or large commercial complexes which have their own caterers.

b) Offer to pick up lunch dabbas of people in offices.

c) create custom “specials” of popular restaurants and offer them on your web site, a different one each week. Like a biryani special including a side dish and coke, with a 1, 2 and 3 item types.Hopefully if the demand improves the restaurant will find it meaningful to give you a piece of the pie for the business and the pre-planning.

d) Get fundoofied containers on the cheap through mass production. Use them instead of restaurants, hopefully get them to pay you. Sell advertising on the container.

e) When you know you’ll lose money, refuse the business. That’s the real lean thing about business.

Hopefully, this is of some help. Sorry for my bluntness. That’s how I am.
Puneet Nirogam Aggarwal August 3, 2012, 10:15 am

Hi Krishna,

Just to understand, FoodPanda in Delhi, and JustEat in Bangalore is doing the same stuff. How are you different ?
Have you spoken to them whether they have got funding, and if yes, probably – you can form a similar strategy and learn something from them

Regards, Puneet
anoop August 3, 2012, 11:23 am

Hello,

The Hyderabad equivalent inmins.com maybe it might help contacting them for more information

Cheers,

Anoop
Sai Rodinhood Pothuri August 3, 2012, 12:04 pm

Dear Anoop

Thanks for letting us know about inmins.com i am based in Hyderabad and i just done a simple order. Lets see the result,

Thanks

Sai
anoop August 3, 2012, 12:38 pm

you are welcome sai,last time i tried them they didn’t seem to be organised too well, my impressions were, the only plus point being their service is unique in Hyderabad currently,their service delivery,data collection technique(rather lack of it) was nonexistent, still had multiple missed calls from the delivery person, having to call back to confirm, and the delivery person was barely recognizable as a employee of the company.I think they are start up issues and with competition coming in they would start looking at those aspects.Time taken was more than 1 and half hour even while the origin of the delivery boy the restaurant and my location was in a 6km radius.

Hope you get your order in time 🙂

Cheers,

Anoop
Sai Rodinhood Pothuri August 4, 2012, 5:46 am

Dear Anoop,

Its Done

1) Online Order placed at around 5 Pm

2) Got the call at 5:20 pm

3) the item selected cant be delivered as due to weekend so selected another item from Paradise

4) Confirmed the call with new item at 5:40 Pm and delivery by time 7:30 Pm

5) Delivery boy called me at 7:15 Pm. he is quite near to my area and by 7:30 its delivered

6) They took 50/- as delivery charges and no extra cost. even if i plan to go to that hotel.. it will cost 40/- for petrol

Thanks

Sai
Sridhar V August 12, 2012, 2:08 pm

I’m not an expert in start-ups and VC funding, however let me share some of my personal views on the website- please ignore if you think my points are not justified. Assuming I’m a potential consumer I was not sure about what the website is about. If you just put three or four points on the home page about how Yo Potato works and use some food-based graphics one can understand what its all about. Probably people don’t order from website but if they want to use your service they can immediately know how to do it.

The first page can be made more crispier and blogs and other stuff can be moved elsewhere. I’m sure there are many people who just visited your website but not tried the service.

For registered members you can provide online ordering service or an option where they can leave their number or message and you call back to take orders. Just a suggestion.

Despite above points I find the initiative wonderful and find it interesting to note that someone is bold enough to offer such a service in Chennai, which is known to be relatively conservative though its changing with times.

You may not agree with me but I feel that the blog part and story about ‘potato missiles’ can be shifted to a different page. If the website looks more customer friendly and simple I’m sure you can leverage that to get more calls or orders.
Krishna Chidambaresh August 16, 2012, 10:04 am

Hey Puneet,

Call one number, order from any restaurant of your choice, no minimum orders. We have absolutely no list of restaurants for the customers to choose from. I guess thats the differentiator thats gaining us traction.

Thanks,

Krishna
Krishna Chidambaresh August 16, 2012, 10:05 am

Hi Sridhar,

Point taken. Thanks for the inputs! We will work on it.

Cheers,

Krishna
Puneet Nirogam Aggarwal August 16, 2012, 10:10 am

Krishna, that is a big differentiator. This gives me tremendous choice and I would love to have something like this Pan-India.
Krishna Chidambaresh August 16, 2012, 10:26 am

We were providing the service for free for consumers till Jul which got us a lot of traffic so much so that we even had to capacitate ourselves expecting jump in volumes consecutive months.We were almost growing at 50% m-o-m. Hence higher staff strength and burn rate. We will be able to manage with half of that currently given that we have pivoted into a “premium” model. We can bootstrap like crazy like we do currently and keep it at 1L. But, this is only good as long as we strive to keep the sales volume low. If we market ourselves through restaurants, we would need more people and need them quick.

If interested, I’d be happy to share our financials if you are considering an investment.

Thanks for the inputs!

Cheers,

Krishna
Krishna Chidambaresh August 16, 2012, 10:34 am

Hi Ashish,

Thanks for the kind words. I can’t agree more than Rodinhoods is a planet within a planet. The Utopian world of entrepreneurs.

Also, Can you share me the link of this UK investor you were referring to? I tried looking up but couldn’t find it. Appreciate any help.

Cheers,

Krishna
Krishna Chidambaresh August 16, 2012, 10:40 am

Thanks for sharing your views, Sujoy. It took us 6 months to realize the need to change the model. Partly, because of the reaction from the investors. Left to us, we would still continue with our earlier model of only getting paid from restaurants, solve problems for huge number of people and then add layers of innovative features to it for further monetization and be the market leader. But, that kind of an attempt is not necessarily appreciated by investors who need more concrete plans to believe and see money coming in.

Having said that, it is crucial for us to foresee things, identify what we metrics to track to take a call on the model and further iterate or pivot. Thanks for the inputs!
Sridhar V August 19, 2012, 8:13 am

Hi Krishna,

Wish you all the best in your venture. Looking forward to see this in Bangalore too.

Have a nice day.

Sridhar
Alok Rodinhood Kejriwal October 11, 2012, 9:10 am

Did something happen on this??
Puneet Nirogam Aggarwal October 11, 2012, 9:15 am

Its a good venture. But there are similar players operating in the market.
asha chaudhry October 14, 2012, 4:32 am

for all of you who have been following krishna’s distress story… pls read krishna’s latest post! (pasted below for you).

kudos to all of you who have helped Yo! Potato do a 360!!!

“This is not the first time I am writing at Rodinhoods. Last time I wrote, I wrote in desperation. If you haven’t gotten get around reading it,you can find it here.

I run a startup called Yo! Potato.

We started Yo! Potato December last year and from a very humble beginning with just 17 orders in the first month, we have grown to over 1000 orders per month. We have rigorously tested our business model and have had the courage to learn from the market and pivot various parts of our strategy so far and then… the ship hit the rock.

Though we were very happy with the progress and had enough excitement and traction from the market, we didn’t attract any serious investors. VCs beat us down on the traction and said they can’t participate unless we get to a size tempting enough. Friends and families have given it all. Savings dried up. New loan sources seemed far off. Salaries were not paid in months. Landlord threw us out losing hope we’ll ever be able to pay all the dues.

We moved into one of our employee’s house which could only house our order takers. We had no place for our riders and sheltered them in a parking lot of our old office. Rain or sun, that used to be where we worked from for almost 3 months. It felt like a free fall into a humiliating failure.

Life has a way of playing with your hopes and fears but I was glad I wasn’t beaten down by it. The fool’s intuition kept telling me the help is around the corner. It could be any one. Any connection. Just that I wasn’t sure who else should I be talking to?

That’s when you do crazy things. Like me trying to get help from a big shot like Alok. I wouldn’t have done that when I was sober from troubles because, who would be crazy enough to think someone like Alok gives a damn about a guy in Chennai who needs help ?

I called him and announced myself, “Alok, this is Krishna from Yo! Potato. I have read your blog and watched your videos a couple of times. I am in a bit of a pickle right now. My startup is sinking and will be dead in 15 days if I don’t get some help from somewhere. You got anything for me?”.

His response to that was this – ” (sweared at me like a dozen times in a totally funny, chilled out way) and then brainstormed with me about ways to get me help. He came up with a plan. “Post it on TheRodinhoods and I’ll pass the word around like crazy to everyone. TheRodinhoods won’t give up on you, man! It never does”

He even started contemplating setting up a kickstarter in India and he was talking about doing that now and helping me out. I was thrilled at his energy and absolute sense of purpose in helping entrepreneurs but I figured that’s who he is even outside entrepreneurship community.

So, I took his advice, posted on TheRodinhoods and watched responses pouring into my inbox from prospective investors, entrepreneurs and advisors. 3 weeks later, I found my investor who is an amazing marketing guy with terrific zeal and love for Yo! Potato. I mean, given a choice I would have happily partnered with someone like him as a co-founder even if he doesn’t bring money to the table. Brilliant. This happened in 3 weeks.

Today, we have adequate resources we need to cross a few milestones and become Series-A ready. I am absolutely happy the way things have turned out and guess what made this possible? – The crazy thought that someone as big as Alok would give a damn about me and my startup. If you ever stop to wonder like me, remember this – IT WORKS! :)”
Bhavya Sahni October 14, 2012, 6:10 pm

If I might, what is the role of the business manager?