TinyOwl’s downward spiral: from foodies' favourite to employees' nightmare

While some of the other IIT-Bombay graduates-run startups are doing well, raising funds, and winning customers’ hearts, one particular venture has been recently facing a lot of trouble trying to do all three.

Yesterday, four of TinyOwl’s five Co-founders, Harshvardhan Mandad, Gaurav Choudhary, Saurabh Goyal, Shikhar Paliwal and Tanuj Khandelwal, each set out from their Mumbai head office to personally close their chapters in four cities – Chennai, Pune, Hyderabad and Delhi.

The nightmare 

Well, the mission was a tough one but it was accomplished. They shut down operations in all four cities, to manage them remotely. The only two offices remaining will be the ones at Mumbai and Bengaluru, according to sources.

Journalists across the country covering startups got frantic calls from sources inside the company. All of them were venting their frustrations on the company. Every publication that closely tracked startups in India had the story out in a couple of hours, but there was something missing in all of them.

The fact that the around 200 employees were not as helpless as we thought they were.

Late last night, I got a call from one of the employees who had been laid off.

“We are not going to let this founder go. He is holed up in the office and we are not going to budge without a proper commitment regarding the future…our future. We are waiting for some answers, and we deserve better treatment,” the voice on the other end was shaking. There was of course a lot of commotion in the background.

He hung up abruptly, and texted back: “Got to go in. Drama continues.”

Employees, even the women, spent the night in office. Sources said that this was the case in all the four cities where employees had been laid off today. Well-wishers of the company were even afraid that some angry employees might resort to violence.

“We all slept in office like a family, but when we woke up we realised that the co-founder was trying to sneak out saying that he had a board meeting to attend at 10 am,” said a female employee in one of the cities.

The reason why these employees were surging with anger was not because they were laid off (they knew the axe was on their heads), but because they were offered post-dated cheques, while their ex-colleagues who had been laid off 90 days ago had still not received their full and final settlements.

“We are not mad to trust these guys. They have played with our careers. We know their bank accounts are empty and we want cash compensation, else we will keep them here for however long,” a disgruntled employee added.

On the Whatsapp group with all the 80-100 employees across the four cities, they discussed everything from strategies of protest to the large number of overdue vendor/merchant payments.

What went wrong

According to another employee, this is the fourth round of layoffs in the last six months. We wrote about their previous layoffs in September. (Read here)

“With the September layoffs, their number came down to 850. Mid-October they came down to 650. They want to bring it down to 500 by December. They fired most of us, including our managers, but have given some people time till December 5 to find new jobs and move on,” he added.

Chatting with a former employee who used to handle finances at the startup threw a lot of light on the issues at hand.

“Yes, money used to come in but they would blow up even more money,” he said.

He also added that they used to spend almost 200X their returns on customer acquisition. He quoted the example of a newspaper advertisement where tens of lakhs of rupees were spent, and which never went live.

About the layoffs, Harsh had told Economic Times, "It was a tough decision. Going forward, our operations will have to be more tech-oriented because margins are thin in the food business as compared to other online marketplaces."

If the economics remain as unjustified as it seems, it might indeed be a downward spiral for foodtech startups in India. Read more here.

The last one year for this sales employee at TinyOwl’s Pune office is an example of the disturbing fact.

“This is the second job I’ve lost in a foodtech industry. I was working for FoodPanda last year and suddenly they acquired TastyKhana, and boom, we were not needed anymore. They decided to keep the sales guys of that company. My resume looks so bad now!” he said.

TinyOwl's roller coaster ride

After colossal damage was already done, and most newspapers and online news media caught a whiff of what was happening at TinyOwl, the company sent out a press release late Tuesday evening stating the recent happenings as “an organisational restructuring to increase its efficiency and productivity involving eliminations of certain positions from the company.”

It also spoke about a “refurbished product” that will be available only in Mumbai and Bengaluru. The startup promised that they would continue operations, as usual, in all six cities.

The last two years, since its inception in 2014, have been quite a rollercoaster ride for everyone involved in TinyOwl. When they started, they were one of India’s most-loved food startup. They raised about $28 million funding from VCs like Sequoia Capital, Nexus Venture Partners, Matrix Partners, and angel investors like Kunal Bahl and Rohit Bansal (founders of Snapdeal).

We even wrote about their snazzy office in the extravagant property in Powai, Mumbai. But now the office, which once housed over 500 employees, will seem empty to passersby.

Harsh had said in the release: “Every business goes through its own unique journey with some hits and definitely some misses. We have had our share too. But the important aspect is to learn from your journey along the way and continue to do what is best for the brand. We thank all our employees for their contributions in making TinyOwl one of the fastest growing startup brands in the market today.”

Rumors have it that the company, which is evidently running out of money, might be in the process of a distress sale to one of the larger food delivery companies in the country.

Accepting that the company made mistakes is the best way to deal with the situation. While laying employees off is an unpleasant way to make the startup lean, there is no other way to do it when the DNA of the company changes.

A wise entrepreneur friend of mine once had this to say about firing employees: “It has to be done when it has to be done. It is like mountaineering. You can’t scale the peak of the mountain with the same gear you brought to go to the base camp. Times change and needs change.”