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growth 04 Nov 2014

Why tech food companies getting thumps-up from investors?

Tech food companies like Zomato, Lime Tray, Gourmet It Up, have raised upto USD 300, 000 funding from a clutch of investors. With people moving towards e-commerce platform food brands have also tied up with them.

By Nusra Deputy Features Editor

The buzz

Tech food companies are getting a green signal from the investors in the country these days. The companies like, Zomato, Lime Tray, iD Fresh and Gourmet It Up are amongst the few to raise a good round of funding from the investors. Matrix India has Rs 30 billion ($488 million) under management and invests in consumer-focused companies at the seed, early and early growth stages. Gourmet It Up, the restaurant reservations platform has raised USD 300,000 angel funding from a clutch of investors, including corporate executives and iD Fresh Food (India) Pvt Ltd, a leading ready-to-cook packaged food company, has raised Rs 35 crore from venture capital firm Helion Venture Partners.

Ongoing trend

Restaurant and food industry is no more lagging behind when they are mapped on online platform. With increase in the number of online food stores and online ordering platforms, restaurant industry is going through a phase where people are first placing their order online and then entering into the retail segment. Not only this, the trend in the industry is changing with PEs more keen on sharing opportunity with the casual dining segment, which seems more profitable and scalable to them when they are investing in building the brands.

“In our type we have done a controlled deal that means we are operating the business ourselves, the company as well as the stores. We are focusing more on signing a deal with casual dine chain”, says, Ashish Saxena, CEO, TexMex Cuisine and Partner, TVS Capital.

India is witnessing a lot of F&B activities happening around and Indian F&B industry is luring investors. Sharing his view on the same line, Hemendra Mathur, Managing Director, SEAF India Investment Advisors says, “As an investor, when I would invest in a restaurant chain, I would keep all the parameters in three buckets, the first is backend economics, unit economics and the third is scalability.”

Restaurant chains v/s online platform

With people moving towards e-commerce platform where brands like Burger King, Coca-Cola and PepsiCo have tied up with these platforms, investors in the country are witnessing a great opportunity in these tech-food companies. These companies have either tied up with the food companies to sell their products or providing some or the other restaurant and food services.

According to a leading business daily, The Economic Times, Zomato, which is hit in global online food restaurant guide, today entered into talks with a number of global private equity and strategic investors to raise about $200 million (around 1,200 crore) by December end.  This development could see the Gurgaon-based company become the latest to enter the elite club of start-ups with billion-dollar-plus valuations.

At the same time brands like LimeTray and Gourmet It Up which are not very old in the segment has managed to lure the investors for their expansion. This shows that with emergence of technology, this space is lagging behind the retail formats of the food companies.

"Restaurants are adopting a range of mobile-first technology at a rapid pace to solve their business needs be it discovery, dining experience, ordering, loyalty or restaurant management. The food-tech market is deep enough to have multiple winners,” said, Vikram Vaidyanathan, MD, Matrix Partners India.

Conclusion

In a year or two, we can see tech-food companies spreading their wings in the Indian F&B segment. Today with an ease of getting the things on the table and plate, people are becoming more tech friendly. Ordering food on click of a button, booking your table, giving a call and providing details to the online booking sites and reservation ventures, are giving a new edge to the Indian food segment with investors ready to invest heavily in these sectors.

At the same time, unlike QSRs, which takes time to get profitable, casual dining has become a sustainable format and can be scaled up in a profitable way. Not only this, experts believe that casual dining is experiential and not transactional like QSRs and hence, this segment is attracting more PEs attention.

So, we can say that the tech food companies together with the casual dining segment are going to rule the country by giving investors scalability in their business, making the business more profitable.

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