🐝 Why Fastbee quit after 1.5 years in Singapore

Hey Founders,

Welcome to The Runway Ventures, a weekly newsletter where I deep dive into startup mistakes and lessons learned to help you become a better founder.

In startups, we are used to hearing only success stories. Startup A raised Series A, Startup B just got acquired, or Startup C went IPO today. However, despite these success stories, 90% of startups fail — and we never know.

🐝 Today, I want to share the humble beginning of Fastbee in Singapore, and how it rose and fell within 1.5 years. And most importantly, its mistakes and lessons learned for us.

Let’s get to it! 🚀

☠️ 1 Failed Startup: Fastbee

🚀 The Rise of Fastbee

🐝 Fastbee was founded in 2017 as a service that delivered hawker food via vending machines as distribution points. It was founded by Khoo Kar Kiat — a mid-career entrepreneur who left his 8-year career at the Economic Development Board (EDB) at the age of 33.

At its peak, Fastbee operated 10 vending machines and made more than 800 deliveries a week.

• The Problem — Customers at business parks had limited food options and didn’t want to pay high fees for door-to-door food delivery.

• The Solution — Fastbee provided a wider range of hawker food options to customers at a cheaper cost with convenience.

  • Customers placed their orders using Fastbee’s mobile app before 10:30am.

  • Hawkers started preparing food at 11am.

  • Fastbee collected orders from hawkers and delivered the orders to vending machines nearby for self-collection after 12pm.

🤝🏻 Why this formula is a win-win

• With the cutoff time to order before 10:30am, hawkers received orders during their off-peak , pre-lunch period.

• Fastbee minimised logistics costs with bulk deliveries of up to 50 meals per vehicle.

  • 💰 Unlike most food delivery companies, Fastbee didn’t take a cut from orders and only made money through a fixed $1.50 delivery fee for each order.

• Customers had more food variety and enjoyed their warm and fresh food at a cheaper cost.

Kar Kiat also successfully raised funding from angel investors, ACE Startup Grant, and incubator NTUitive. But the fund wasn’t enough to sustain the business, so Kar Kiat also financed Fastbee using his own savings.

Within 8 months, Fastbee quickly expanded from 1 to 10 vending machines in 2017 across various industrial and business parks.

📉 The Fall of Fastbee

⚠️ While the expansion seemed like a good move, that was when the problems began:

• Catering services closed up for relocation when they already had pending orders from customers.

• Fastbee’s drivers didn’t turn up for work.

• Faulty vending machines (i.e. lockers couldn’t be opened).

  • Customers got frustrated as their lunch hours were already over by the time the issues were solved.

• Hawkers gave the wrong orders.

Despite the problems mentioned, the biggest problem of all, in my opinion, was its business model that charged $1.50 delivery fee per order, resulting in a low profit margin and making it hard to scale to more vending machines without VC funding.

💸 By early 2018, Fastbee couldn’t raise money from investors for 2 reasons:

• VCs were looking at a hyper-growth trajectory (100%-200%) but Fastbee’s customer growth was around 10%-20%.

• Investors doubted the exportability of Fastbee to other countries.

At the same time, Fastbee was outcompeted by other competitors with their resources to perform extensive marketing efforts, like giving out promo codes to customers aggressively.

Because of these factors, Fastbee was shut down in August 2018. Despite the closure, Kar Kiat had no regrets because the experience and lessons learned were invaluable.

Want to learn more about Fastbee’s downfall?

• This Startup Is Solving Ulu Office Food Woes – Delivers Hawker Food To A Vending Near Them

• I’d do it all over again, says founder of failed start-up Fastbee

• Why Fastbee Called It Quits After Only 1.5 Years In S’pore’s Food Delivery Scene

⚠️ 2 Mistakes

Mistake 1: Unsustainable business model

Fastbee’s main source of revenue is from the $1.50 delivery fee per order as Fastbee didn’t take a cut from hawkers or impose a minimum order requirement.

While this business model benefitted both hawkers and customers, it probably backfired on Fastbee due to the low profit margin. Essentially, given the business model, Fastbee needed a huge number of orders to keep the costs down with an improved profit margin.

However, in order to have more orders, Fastbee needed to scale to more vending machines strategically in more locations without cannibalising each other.

• Without funding, Fastbee couldn’t scale to more vending machines.

• Without more vending machines, Fastbee had difficulty growing and becoming sufficiently profitable without economies of scale.

Mistake 2: It’s a local problem in Singapore

This was also one of the concerns brought up by other investors during the fundraising.

• Manpower is expensive in Singapore, hence it makes sense to lower the manpower cost to give a more affordable food delivery option for customers.

• However, this might not be true in other countries in Southeast Asia (i.e. Indonesia, Thailand) due to the lower manpower cost for food delivery.

🧠 3 Lessons Learned

Lesson 1: Build a company with a sustainable business model

Throughout my startup journey, I’ve seen many startups (including mine) moved from B2C to B2B business models — and there’s a good reason for it.

If you can solve a problem for a business, you can easily get paid with a bigger deal size. Compared to the B2C model, B2B model has a bigger and more predictable cash flow without having to maximise revenue through a growth-at-all-costs approach (i.e GrabFood).

🧠 For Fastbee, given their business model ($1.50 delivery fee per order), unless they were prepared to use GrabFood’s approach to grow aggressively with VC funding to expand to more vending machines at various locations, the probability of survival was very slim.

Lesson 2: Big ambition needs big market size

Fastbee started with a beachhead market to deliver hawker food to customers at business parks in Singapore via vending machines. Unlike other food delivery platforms (GrabFood, Foodpanda, Deliveroo), Fastbee operated like a location-based business with vending machines — powered by technology.

The market size essentially depends on the number of customers who are willing to pay for Fastbee’s food delivery instead of using other platforms.

🇸🇬 While the beachhead market makes sense in Singapore, it might not be true in other Southeast Asia countries where customers are generally more cost-sensitive and there are cheaper alternatives for food delivery.

With that, the market size could potentially be just a local problem in Singapore instead of a regional problem in Southeast Asia.

Lesson 3: Timing matters

🛵 Fastbee was launched when other big players (GrabFood, Foodpanda, and Deliveroo) were competing with each other for market shares.

As the market slowly moved toward consolidation, the interest was low from investors as they didn’t want to invest in another small startup and hoped they could win against the big guys.

And this is exactly what happened to Fastbee. If Fastbee started around the same time as other players, the result could have been very different as Fastbee could have secured more investors’ funding for expansion.

Timing matters.

That's all for today

Thanks for reading. I hope you enjoyed today's issue. More than that, I hope it has helped you in some ways and brought you some peace of mind.

You can always write to me by simply replying to this newsletter and we can chat.

See you again next week.

- Admond

Disclaimer: The Runway Ventures content is for informational purposes only. Unless otherwise stated, any opinions expressed above belong solely to the author.