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🍜 No funding, no meals
How Yumist got cooked in India despite raising $3M in funding
Admond Lee
September 15, 2024
Hey Founders,
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 story is about how a foodtech startup collapsed despite having the right team to solve the right problem. Let’s get to it! 🚀
Today at a Glance:
☠️ 1 Failed Startup → Yumist
⚠️ 2 Mistakes → Solving the right problem at the wrong timing
🧠 3 Lessons Learned → Timing is important
🔗 The Runway Insights → A guide on how to apply for Y Combinator
💰 Southeast Asia Funding Radar → Charge+ raises $8M Series A from TNB Aura, TRIVE
☠️ 1 Failed Startup: Yumist
🚀 The Rise of Yumist
In 2014, two ambitious entrepreneurs, Alok Jain (former CMO at Zomato) and Abhimanyu Maheshwari (experienced restaurateur), came together to launch Yumist, a startup that aimed to revolutionise the food delivery scene in India.
The Problem — 🥺 Busy urban dwellers craved for nourishing and familiar food but struggled to find it due to the subpar and lack of meal options.
The daily meals market in India was still nascent.
Players like “dabbawalla” and “corporate canteens” were unorganised and food was sub-standard.
The Solution — 🤤 Yumist provided on-demand homemade, comfort and delicious food that reminded people of their mother’s cooking — delivered right to their doorstep.
Instead of working with third-party restaurants like many of their competitors, Yumist cooked all its meals in-house.
This gave them full control over quality, consistency, and pricing.
☁️ They introduced a cloud kitchen model before it became a buzzword in India.
 | ⚡️ Yumist's solution was simple yet effective. 🛵 They created a network of home kitchens where meals were prepared fresh and delivered on demand. More than that, they leveraged technology to ensure speedy delivery, boasting an impressive record of delivering meals within 15 minutes of ordering. |
Their business tapped into a largely unorganised market, aiming to become the go-to brand for daily meals in India.
💰 At its peak, Yumist achieved significant traction and raised $3M from investors like Orios Venture Partners, Unilazer Ventures and Steven Lurie.
🍲🍲🍲 By March 2017, their delivery outlets were:
breaking even at just 70 orders a day
acquiring new customers at $2.17 + recovering this money within 45 days
enjoying good word of mouth (50% new customers from referrals)
having a loyal customer base where 70% of orders came from repeat customers
tripling revenues and gross margins within just 6 months
With a solid demand prediction algorithm and a focus on quality, Yumist was on the brink of profitability, projecting to reach this milestone by June 2018.
Everyone thought Yumist was gonna make it big until the founders made ONE fatal mistake that eventually killed the whole company 🪓
📉 The Fall of Yumist
From launching in a second city prematurely, or committing to high growth, high burn model just because prospective investors wanted to see that back in 2015, or taking a tad bit too long to find the right business model, we made our mistakes.
Yes — the cracks began to show in 2016 when Yumist made the bold decision to expand into Bengaluru without owning a kitchen facility there. This premature move fragmented their brand, led to operational challenges, and eventually killed the company.
📌 Here’s what happened to Yumist:
2014 — 🍱 Yumist was launched.
2015 — Raised $3M from investors.
Feb — Raised $1M of seeding funding.
Dec — Raised $2M from Orios Venture Partners, Unilazer Ventures and Steven Lurie.
Early 2016 — 🏭 Expanded to Bengaluru without owning a kitchen facility there.
This premature launch stopped them from bringing similar enhancements as NCR and fragmented the brand.
Yumist also iterated multiple times across its supply chain to find a viable business model to scale profitably.
May 2016 — ⚠️ Shut down operations in Bengaluru
At the same time, they launched a mega kitchen (12,000 square feet) in Delhi NCR (National Capital Region) to enhance customer experience.
Besides lunch and dinner, it expanded its wings and started offering all-day options, breakfast and snacks.
This move increased their expenses when they were already struggling to stabilise their finances.
Even worse, the food tech sector wasn’t doing well.
The economic climate shifted, investor sentiment turned sour, and the food tech industry garnered a bad reputation among investors, making it increasingly difficult for startups like Yumist to secure the necessary funding.
Sep 2017 — 🪓 Yumist was officially shut down.
Founders failed to raise enough capital to sustain their ambitious growth plans.
The business model wasn’t sustainable as Yumist had yet to reach profitability.
We are shutting shop today. We failed to raise the kind of capital that this business required while staying true to the customer problem. In hindsight, there’s a bunch of internal and external factors that led us to this dead end.
☁️ In hindsight, Yumist was ahead of its time with its cloud kitchen model, which is more popular now than it was in 2016.
The food-tech market in India during their time was highly competitive, with companies (i.e. TinyOwl, Dazo) burning cash to capture market share, but very few could sustain themselves without massive funding. Despite their best efforts, Yumist couldn’t balance the costs of food production, delivery, and customer acquisition — and ultimately died.
Want to learn more about Yumist’s downfall?
⚠️ 2 Mistakes
Mistake 1: Solving the right problem at the wrong timing
🤔 If the founders built Yumist at a different time, would the outcome be different?
Maybe they would have raised enough capital because the foodtech’s reputation, economic climate, and investor sentiment were better.
Maybe they would have enough capital to sustain the loss from the expansion in Bengaluru and eventually reach profitability.
Maybe yes, maybe no, we’ll never know.
But one thing is for sure, as shared by the founders, that the Cloud Kitchens are here to stay (just like what Swiggy, Zomato, are Grab are doing). The problem was big, the vision was ambitious, but the timing was wrong — maybe.
🕰️ Timing matters
Personally, I thought having the right team to solve the right problem was the only thing that mattered. After my first startup failed, I realised that timing plays an important part in the equation.
If the market isn’t ready for your product, you can either raise tons of money to educate the market or pivot to another market with a higher chance of winning.
The choice is yours.
Mistake 2: Overambitious expansion
After launching in Bengaluru prematurely without a kitchen facility, Yumist shut down its Bengaluru operations in May 2016 and was still recovering from the losses incurred.
📈📉 Despite the loss, high burn, and fragmented brand, it still launched a mega kitchen (12,000 square feet) in Delhi NCR at the same time. Pressured by investors to expand quickly, the reality hit when Yumist was running out of money and couldn’t raise another round from investors due to the economic climate and investor sentiment.
Finally, the overambitious expansion backfired and Yumist got cooked.
🧠 3 Lessons Learned
Lesson 1: Timing is important
Yumist was ahead of its time with its cloud kitchen model, but the market wasn’t ready for such innovation back in 2014-2016. Had Yumist launched a few years later, they might have found a more favourable environment with better investor sentiment and less financial pressure to grow rapidly.
🌟 Key Takeaways:
🕰️ Timing can make or break a startup
It’s not enough to have a great product or idea, the market needs to be ready for it.
If you’re introducing something revolutionary, ensure that the market is primed, or have enough funding and patience to educate the market.
🏡 For example, Airbnb was launched at the perfect time during the financial crisis in 2008.
Travellers were seeking cheaper alternatives to hotels to save money during the tough time.
Homeowners were looking to earn extra income by renting out their spare rooms or properties.
Even though Airbnb’s concept was new, the market was definitely ready for its solution — and the rest is history.
Lesson 2: Don’t expand without solid foundations
Focus on solidifying your foundations and core market before expanding. Expanding prematurely to another market with the assumption that you can get future funding to continue burning cash is almost always a sure way to die.
🌟 Key Takeaways:
💪🏻 Always build a solid foundation before expanding
Don’t let external pressures (like investors) force you into premature moves. Focus on making your core market work profitably before moving into new territories.
Airbnb started out by focusing on one city, San Francisco, where they worked tirelessly to perfect the user experience and build a strong customer base. Only after they had proven their model in one city did they expand to other cities globally.
In contrast, Yumist’s premature expansion led to operational stress and resource depletion.
🧪 Test expansion on a small scale first
Before committing to large-scale expansion, test your model in a smaller market or with a pilot project. This allows you to understand the logistical, operational, and market-specific challenges that arise without risking the entire company.
If the pilot is successful, then it makes sense to expand further.
For example, McDonald’s is known for testing new menu items in select locations before rolling them out nationwide. This method allows them to evaluate demand, improve operations, and perfect the product based on customer feedback before investing in a larger expansion.
Lesson 3: Adapt quickly to market shifts
Yumist was caught off guard when investor sentiment towards food-tech startups shifted. The economic climate worsened, making it hard to raise capital just when they needed it most. If they adapted more quickly by reducing their burn rate or slowing expansion, they might have survived.
🌟 Key Takeaways:
⚡️ Stay lean and agile
One of the most important advice I’ve received is to always stay paranoid in business.
When you’re paranoid that something could go wrong, you’d be more cautious, more lean, and more agile because you foresee potential disasters a few steps ahead.
When you pre-empt the disasters, you’d be more prepared, and when shits happen, you can move fast and avoid dying.
Most startups become successful because they stay in the game long enough to outlast other competitors.
🔗 The Runway Insights
💰 Southeast Asia Funding Radar
Charge+ raises $8M Series A from TNB Aura, TRIVE (Link)
Singapore’s Lunch Actually and Paktor merge to expand pool of potential suitors (it’s a match!) (Link)
Pathao gets record $12m to build Bangladeshi fintech (Link)
Wubble.ai nets funding for its AI-powered commercial music creation solutions (Link)
Humble Sustainability, a Philippines-based climate tech startup, receives funding from Gobi Partners to expand its circular economy efforts (Link)
Funding Societies obtains investment from Maybank to drive MSME digital finance in Southeast Asia (Link)
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That’s all for today
Thanks for reading. I hope you enjoyed today's issue. More than that, I hope you’ve learned some actionable tips to build and grow your business.
You can always write to me by simply replying to this newsletter and we can chat.
See you again next week.
- Admond
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