Learning from TinyOwl business failure

This is one of the initial solutions in the food ordering segment which connects the restaurant business chain.

For a restaurant owners, chefs, supplies and customers, this solution was able to connect the whole ecosystem

Once TinyOwl is the fastest food-ordering Mobile app.

It is such an excellent solution, why has it failed to take off?

The company envisions was to merging food and technology to give its users a convenient and seamless experience.

TinyOwl has tie-ups with thousands of restaurants in Mumbai.

It aims to give customers the best experience with food discovery and ordering.

TinyOwl was established in 2014 by 5 IITians.

It has successfully made its presence felt in the online ordering segment.

It is considered the strongest player after funding from various sources like Sequoia, Matrix Capital & Nexus Venture partners.

There were 12 friends who started this company.

It was the initial few such solutions for that value chain

The gap was: Restaurant owners and chefs wanted to grow their businesses but had no resources to do so. The customers did not trust the restaurant, and the restaurant did not know how to acquire a customer.

They wanted to bridge these gaps.

TinyOwl ran 4 total rounds of funding between 2014 to 2015 and big investors pitched in. Companies like Sequoia Capital India and Matrix Partners were vying for a piece of the pie. These investors together raised a whopping $27.7 million in total over just two short years, which set a very successful financial benchmark for the company.

Despite raising $23 million in funding from Sequoia Capital, Matrix Partners, and Nexus Venture Partners in 2014, it fired 300 employees the next year. In 2016, it shut down its country-wide operations, except in Mumbai.

In 2012, food delivery was not a well-adopted option and thus, the Indian market was fresh and just waiting to be tapped into. Everyone was looking for such a solution and investors also pour in money.

Their app was downloaded by more than 100k in Mumbai and they have more than 100 delivery boys hustling around Mumbai. Their technology team has 40 engineers and the design team has 15 individuals who are carrying out on enhancing the app. And there is a senior management team that assures the stable functioning of the team, which has grown to 400 in a year.

The app did essentially everything it could. It’ was a modest and amiable user interface; the continually updated menus and prices; everything made the app obvious, convenient, and steady to apply.

When you open the app, it recognizes your location and provides you a list of adjacent restaurants. You can then determine your dishes/cuisine from the menu and give the order by adding details on where to spot you. You have opportunities to pay via card/cash. It further provides you the convenience of tracking the delivery.

The app gives not just the food menus; it illustrates each dish and provides you with the chef’s profile. Proposals based on your old choices were also presented.

‘TinyOwl Homemade’ app, which allows you access to food from home chefs. The homemade app provides you the option of taking home-cooked food and lets you reach the nearest home chef in your locality. The homemade app operated in some parts of Mumbai with an intention to expand its service finally to other cities.

Why has the company had to shut down?

One day, in late 2016, a major chunk of TinyOwl users received a notification alert on their phones:

“TinyOwl services shall be discontinued in your city starting from 22nd May”.

This alert went out to everyone in the 11 operating cities, except for a few areas in Mumbai where TinyOwl was headquartered.

Founder maturity and readiness :

The 2 co-founders, Harshvardhan Mandad and Tanuj Khandelwal, along with the other three members of the core team were all inexperienced and young. All 5 of them were between 22 to 24 years of age when the company received funding and blew up. They had 600 employees and multiple cities to look over but didn’t have enough knowledge or industry know-how.

Too much money spent:

Too much money is spent in too much inefficient a manner!!

It was not well-thought through. The customer acquisition cost was sky rocketed at an unsustainable level

They over-hired and over-expanded, but didn’t have enough organization in the company, especially in the top management, to keep up. Soon, this strategy failed.

They spent too much, and in order to lessen costs, they had to undertake massive rounds of layoffs which didn’t go down well in the corporation or with their employees.

Technology challenges:

A dish-based aggregation system. That was like if you opened the app — it would tell you what’s today’s dish and would give you options on where you could order it from.

The idea turned out to be wrong due to a lack of technical aspects. There was hardly any artificial intelligence used, no data analytics were there, and the pivot tanked with just less than five orders a day.

Hiring mistake:

The right people on the bus in the right seat were significantly missing

There is a major fault in the company roadmap; the wrong hiring multiplied it

Mass layoffs:

It caused panic in the people’s minds and created a negative sentiment

The team’s performance automatically decreased

Organization structure:

The structure of the organization was not ready to take the scale-up operation required at the peak time

Too much in too little time, with many mistakes to manage in too short time....cause the ship to sink

What would you do differently if?you were?the product coach for this company?