🐓 The chicken startup that couldn't fly

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Welcome to The Runway Ventures — a weekly newsletter where I deep dive into failed startup stories to help you become the top 1% founder by learning from their mistakes with actionable insights.

💛 Today’s issue is co-created with Nelson who is the founder of Good Karma Club — a weekly newsletter that shares startup insights and resources with impact founders in Southeast Asia.

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☠️ 1 Failed Startup: Pitik

🚀 The Rise of Pitik

🇮🇩 Pitik was founded in 2021 by Arief Witjaksono and Rymax Joehana. Arief, with a background in poultry farming (former COO at a traditional poultry farm), and Rymax, with extensive experience in finance (consulting and M&A), aimed to revolutionise Indonesia’s poultry farming industry.

• The Problem — 🐥 Chicken farmers struggle with inefficiencies in farm management, high costs, and volatile demand​.

  • The poultry industry in Indonesia was ripe for disruption with chicken consumption projected to grow by 13.5% to reach 9.3 kilograms per capita by 2029.

  • However, Indonesia’s poultry production lagged behind global standards by 20-30%.

  • This means the demand is massive, and there’s an urgent need for improvement.

• The Solution — 🐓 Pitik is an agritech startup that empowers Indonesian chicken farmers through technology to produce chickens more efficiently.

  • It provides farmers with smart farming applications, farm inputs, and financing solutions to enhance productivity and efficiency.

  • With its farm management system equipped with IoT devices and a smart farming app, it gives farmers real-time insights into their operations, helping them optimise chicken production.

  • Pitik also offers financing to farmers who need capital to expand their operations.

Not just that, Pitik’s transparent payment processes differentiate them from competitors as payments are processed within 7 working days, unlike other distributors who delay payments for months.

💰 In May 2022, Pitik raised $14 million in Series A funding including investors like Alpha JWC Ventures and Wavemaker Partners. The game plan? Expand across Indonesia.

🐓🐓🐓 At this point, Pitik was seen as a rising star in Indonesia’s agritech scene. It was probably Indonesia’s largest poultry tech company. It was flying high…

📉 The Fall of Pitik

🍗 Well… Pitik actually started sinking 1 year after raising fund.

The downfall of Pitik began to unravel as quickly as it rose to fame due to a tangled mess of aggressive expansion, over-reliance on investor funding, and failure to adapt to the challenges of Indonesia’s volatile poultry market.

📌 Here’s what happened to Pitik:

🐓 Pitik’s downfall is a classic case of over-expansion and over-reliance on external funding. Their aggressive hiring and expansion, fuelled by investor money, left them vulnerable when the market conditions shifted.

🍗 In the end, they could not adapt quickly enough, leading to layoffs, lost investor confidence, and the eventual shutdown of operations.

Want to learn more about Pitik’s downfall?

• Pitik dikabarkan lakukan PHK

• Indonesian chicken startup’s 20x revenue jump sees it take off

• Indonesian poultry startup Pitik said to have laid off more than 50% staff

• Indonesian poultry startup Pitik said to have ceased operations

⚠️ 2 Mistakes

Mistake 1: Over-reliance on investor funding with aggressive expansion

Pitik raised a whopping $14 million in Series A funding in May 2022, which fuelled their aggressive expansion plans across Indonesia. However, they became overly dependent on this influx of cash without establishing a sustainable revenue model.

When market conditions shifted, they found themselves unable to adapt. By 2023, when they attempted to expand to Sumatra, they faced economic challenges that forced them to hit the brakes. Besides, words on the street said Pitik was overhiring. They hired too many people with high salaries beyond the normal market rate.

📈📉 In short, Pitik grew rapidly after the pandemic and raised tons of cash when the interest rate was low (easy money). As they expected to grow even more quickly, they hired more people to scale faster. And when shit happened, they were burning cash and bloated with headcount that ultimately led to massive layoffs.

Mistake 2: Failed to adapt to market shifts

In an interview with Tech in Asia, Rymax said that one of the biggest challenges in Indonesia’s poultry industry is demand volatility.

Typically, demand volatility is due to:

🧑🏻‍🌾 Internal Factors:

• The demand fluctuates as many Indonesians still consider chicken a luxury food.

• When harvest time comes, prices fall far below contract prices agreed between most startups and their farmers.

🔥 External Factors

• Price hikes in chicken feed due to the ongoing Ukraine crisis have pressured margins in this industry, as any rise in chicken meat prices hurts demand.

• Besides, Arief said that the poultry industry in Indonesia was hit by the fuel price hike in October 2022, causing the demand to be lower at that time.

Yet Pitik was unprepared for the economic downturn that hit in early 2023. Their business model relied heavily on predictable growth, but when market conditions shifted, they couldn't pivot quickly enough to stay afloat.

By the time they realised that, it was too late.

🧠 3 Lessons Learned

Lesson 1: Be optimistic long term, and pessimistic short term

Being optimistic about the future is important to maintain a long-term vision, but it’s also important to be aware of the short-term realities that could derail your plans. Always think a few steps ahead and foresee potential disasters in the future.

In the context of Pitik, the founders raised significant funds and expanded aggressively without fully preparing for potential market fluctuations or operational hurdles. Expansion looked good for the short term, but bad for the long term when shit happened.

Lesson 2: Build a self-sustaining business (not just a fundraising machine)

While investor capital can accelerate growth, relying too heavily on external funding is risky. Pitik’s aggressive expansion, hiring spree, and reliance on investor money left them in a vulnerable position when they couldn’t secure more funding.

Lesson 3: Adapt quickly to market shifts

Pitik’s failure to adapt to Indonesia’s volatile poultry market was a major cause of its downfall. This shows the importance of being nimble and proactive when market conditions shift.

If you move slowly you’ll die. It’s brutal, but that’s the reality.

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See you again next week.

- Admond

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