Food tech start-ups such as Zomato have been struggling to scale their businesses, making wary investors pile pressure on start-ups to reduce cash burn on discounts and overhead costs. The pressure has been trickling down the management ranks. Photo: Ramesh Pathania/Mint
New Delhi: Zomato Media Pvt. Ltd’s chief product officer Tanmay Saksena has abruptly left India’s largest food discovery and ordering platform, highlighting investor pressure on food delivery websites to improve their financial metrics.
Saksena’s departure comes barely a year after he joined Zomato, one of India’s most valuable start-ups, having spent four years at Disney Social Games as vice-president (studio operations), based in Palo Alto, California.
He was promoted last month as chief product officer, having earlier served as the global business head for the company’s food-ordering business.
“Tanmay was one of our best people, and we are sad to see him go. We wish him luck for all his future endeavours,” a Zomato spokesperson said.
The spokesperson said Saksena had headed Zomato’s online food-ordering operations until the end of October, when the company’s co-founder Pankaj Chaddah assumed the role.
“Under Pankaj, we have seen the number of orders per day quadruple over the last three months,” the spokesperson said.
Saksena did not respond to emailed queries and calls fromMint.
This isn’t the only abrupt departure in recent months at Zomato, which has struggled to retain top management executives.
In July last year, ex-Facebook Inc. executive Namita Gupta quit Zomato within a year of joining the firm as chief product officer from Silicon Valley.
Chief financial officer Umesh Hora quit in November to join CarDekho.com. Chief marketing officer Rameet Arora quit the company in January 2015, barely six months after joining from McDonalds Corp.’s India operations.
Food tech start-ups have been struggling to scale their businesses, making wary investors pile pressure on start-ups to reduce cash burn on discounts and overhead costs. The pressure has been trickling down the management ranks.
“There is a problem in the way Indian start-ups hire. If you look at companies in Silicon Valley, they hire for tomorrow and not today,” said Prateek Srivastava, co-founder of Basil Advisors, a hiring consultancy.
“The needs and requirements of a start-up keep changing and therefore there is a disconnect in the expectation levels of founders and investors, and that of senior-level hires,” he said.
Srivastava pointed out that India’s start-up ecosystem is still not evolved and hence people from Silicon Valley find it difficult to adjust in the country. “An expectation correction needs to happen,” he said.
Poor unit economics in the food-ordering and delivery sector leads to high burn rates, experts said. 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 on delivery.
According to people familiar with the development, Zomato’s entire leadership team, including founders Deepinder Goyal and Chaddah, have been trying to cut spending and improve business dynamics to inch closer to profitability.
In January, Zomato shut operations in four cities citing poor demand. In October, it also cut 10% of its workforce to curb costs.
In November, an internal email by Goyal surfaced in several media publications that spoke about the company’s alarming rise in costs and drop in sales. The email highlighted heightened pressure on the sales team by Zomato’s management.
In December, Mint reported that Zomato was looking to invest $40 million in its food-ordering business by June 2016. Zomato was valued at about $1 billion in September when the company raised $60 million from Singapore’s Temasek Holdings Pte and existing investor Vy Capital.
The company, which ventured into food-ordering only in May, having earlier been a restaurant search and review website, faces stiff competition from Bengaluru-based Swiggy, which raised $35 million in January.
With several companies struggling to scale their operations and some shutting down, the food-ordering business has largely become a three-way fight between Zomato, Saif Partners and Accel Partners-backed Swiggy, and Rocket Internet-funded Foodpanda.
Internet-first kitchen SpoonJoy (Emvito Technologies Pvt. Ltd) was bought by Grofers (Locodel Solutions Pvt. Ltd) in October; restaurant aggregator Dazo shut down in the same month. Another food tech start-up, Eatlo Tech Solutions Pvt. Ltd, closed in December.