A PoV on applicability of design in VC business. This presentation builds on market evaluation of Cloud Kitchen Startup space, and basis the hypothesis compares 6 Startups.

1. ‘DESIGN IN VC’ THESIS
CLOUD KITCHEN USE CASE
Prateek Parijat
Consultant, Zinnov Management Consulting
Advisor, Readybowl

2. 2
“Design is to design the Design of a Design”- Prof. John Heskett
A concept An activity
A plan to satisfy a set
of requirements Final outcome

3. DEFINITION
FOOD INDUSTRY VALUE
CHAIN
MARKET SIZE
ADDRESSED MARKET
CONSUMER TRENDS
SUPPLIER TRENDS
CLOUD
KITCHEN
2
UNIT ECONOMICS
CLOUD KITCHEN
ADVANTAGE
TOP PLAYERS
BUSINESS
VIABILITY
3
HUMAN
DESIRABILITY
4
WHAT’S IT ABOUT?
CLOUD KITCHEN
ADVANTAGE
EMPATHY FRAMEWORK
TOP PLAYERS
TWO BY TWO
DESIGN
THIKNING
5
3
INTRO-
DUCTION
1
STARTUPS ARE FAILING
RISE OF DESIGN IN
STARTUPS
RISE OF DESIGN IN VC
RISE OF HUMANS
DESIGN THINKING

4. INTRODUCTION – STARTUPS ARE FAILING
Failure to incorporate market needs with innovative tech has caused fallout of many Startups
4
Startup failures due to product/service development
for ‘No Market Need’ among 20 reasons*
%
*Source: CB Insights | Based on 101 Startup post-mortems
WHAT SHOULD STARTUPS
DO TO AVOID THIS MOST
COMMON FAULT?
HOW SHOULD VCs
EVALUATE A STARTUP TO
AVOID SUCH FAILURES?

5. 5
CAN DESIGN BE AN ANSWER TO ALL THIS?

6. INTRODUCTION – RISE OF DESIGN IN STARTUPS
Design is gaining prominence among Startups as a basis to develop and deliver value
6*Source: NEA – The Future of Design in Startups | Based on survey of 350 Startups
STARTUPS ARE REALISING DESIGN’S
IMPACT ON BUSINESS ACROSS*:
HIGHER SALES
HIGHER CUSTOMER
ENGAGEMENT
HIGHER CUSTOMER
RETENTION
HIGHER PRODUCT CYCLES
65%
46%
69%
47%
X% of the Startups
Startups believe that design is important, if
not very important*
%

7. INTRODUCTION – RISE OF DESIGN IN VC
Venture Capitals are investing in Design at the top level from operational to investing roles
7
PROMINENT DESIGNERS ACTIVE IN VCs
JASON MAYDEN | ACCEL PARTNERS
He strives to bring in a design centric founder
community, and help portfolio companies to
identify right problems to solve for
JOHN MAEDA | KPCB
His role is to find strategic insights as to where
design can have the most business impact.
IRENE AU | KHOSLA VENTURES
Au wants to use design as both a diagnostic
tool and a systemic fix inside new companies
JAMES BUCKHOUSE | SEQUOIA CAPITAL
He helps create exceptional user experiences
for the portfolio and the partnership
More designers entered VC in the last 2
years than the previous 4 years combined*
X
*Source: Design in Tech Report – 2016

8. 8
WHAT CAUSED THE RISE OF DESIGN?

9. INTRODUCTION – RISE OF HUMANS
Human-Centric approach is taking centre stage in driving innovations
9
TRENDS IN THE TECHNOLOGY INDUSTRY
DRIVING DESIGN INVESTMENT FROM VCs
NO MORE MOORE’S LAW
Computing technology is becoming smaller, faster and cheaper,
allowing human factor to overtake in dictating course of
product/service development.
WELCOME TO EXPERIENCE ECONOMY!
As we transition from delivering services to experience, the next
competitive battleground will lie in the staging the experiences.
LOWER BARRIER TO ENTRY
Technology has been commoditised to a great extent today (for
e.g. AWS in place of building infrastructure, etc.). Design in such
scenarios becomes the differentiator.
HUMANSThe easily overlooked parameter in Entrepreneurial ventures

10. 10
INTRODUCTION – DESIGN THINKING
Design Thinking strives to bring human to the center of all innovation activities
WHAT IS? WHAT ISN’T? WHAT SHOULD BE!
Entrepreneurs building business
case through
Greater inclusion of empathy in
building a business case through
Business case built through
Design Thinking, which is
Business
Viability
Technology
Feasibility
Human
Desirability
Business
Viability
Technology
Feasibility
Human
Desirability
DESIGN THINKING

11. UNIT ECONOMICS
CLOUD KITCHEN
ADVANTAGE
TOP PLAYERS
BUSINESS
VIABILITY
3
HUMAN
DESIRABILITY
4
WHAT’S IT ABOUT?
CLOUD KITCHEN
ADVANTAGE
EMPATHY FRAMEWORK
TOP PLAYERS
TWO BY TWO
DESIGN
THIKNING
5
INTRO-
DUCTION
1
STARTUPS ARE FAILING
RISE OF DESIGN IN
STARTUPS
RISE OF DESIGN IN VC
RISE OF HUMANS
DESIGN THINKING
11
DEFINITION
FOOD INDUSTRY VALUE
CHAIN
MARKET SIZE
ADDRESSED MARKET
CONSUMER TRENDS
SUPPLIER TRENDS
CLOUD
KITCHEN
2

12. 12
CLOUD KITCHEN – DEFINITION (1/2)
On demand food delivery service
DEMAND SIDE VIEW SUPPLY SIDE VIEW
An online food ordering platform with
On-Demand service
An online food delivery service with
Single food place to order from
Fewer options compared to aggregator apps
Full stack ownership (Food preparation to
delivery)
Higher margins compared to aggregator
services

13. 13
CLOUD KITCHEN – DEFINITION (2/2)
Technology for a Cloud Kitchen service is commoditized, business model and human desirability will drive growth
DESIRABILITY
Saves effort and time in cooking or going out
VIABILITY
Higher margins due to full stack ownership
FEASIBILITY
Mobile app
Business
Viable
Technologically
Feasible
Human
Desirable
CLOUD KITCHEN – DESIGN THINKING

14. CLOUD KITCHEN – FOOD INDUSTRY VALUE CHAIN
Cloud Kitchen Startups operate in the later stages of food industry value chain
VALUE CHAIN INPUTS PRODUCTION AGGREGATION PROCESSING TRADING RETAILING CONSUMERS
SUB-ACTIVITIES
SEEDS
FERTILIZER
FINANCE
KNOWLEDGE
FARMING
FARMER
ORGANISATIONS
SMALL TRADES
TRANSPORTERS
DRYING
PACKAGING
MILLING
COOPERATIVES
WHOLESALERS
SPOT MARKETS
TRADITIONAL
MARKETS
SUPERMARKETS
RESTAURANTS
END USERS
FOOD TECH
CATEGORIES*
Next-Gen Food/Drink
Restaurant Delivery
Cloud Kitchen
Office Catering
Meal Kits
Speciality Foods
Farm to Table
Chefs on Demand
Liquor on Demand
Grocery Delivery
*Source – CB Insights | Food Tech Periodic Table
FOOD ORDERING PLATFORMS
14

15. CLOUD KITCHEN – MARKET SIZE
Design Thinking aids in identifying most relevant market and growth opportunities
15
MARKET SIZING AS-IS WAY MARKET SIZING THROUGH DESIGN THINKING
MARKET SEGMENTATION
TOTAL SERVICEABLE
MARKET (INDIA)
TOTAL ADDRESSABLE
MARKET (INDIA)
GROWTH RATE
(BENGALURU)
TOTAL SERVICEABLE
MARKET (BENGALURU)
TOTAL SERVICEABLE
MARKET, 2020
(BENGALURU)
$90–100B
$35–40B
$3–4B
300%
$10–12B
$45–50B
$15–20B
$1.5–2B
350%
$6-7B
URBAN INDIAN
BETWEEN 20 – 50 YEARS OF AGE
CONNECTED TO INTERNET
CORPORATE
TARGET USERS120,000,000
WORKING WIVES STUDENTS MIGRANT CORPORATES
PG/HOSTEL DWELLERS YOUNG MARRIED COUPLES
Over and above the segmentation achieved in as-is way
TARGET USERS50,000,000

16. CLOUD KITCHEN – ADDRESSED MARKET
Cloud Kitchen owns the biggest share of online food delivery market in India
16
Food Delivery Market in India
Online Food Delivery Market in India
Cloud Kitchen Market in India
Food Service Market in India
$15B
$300M
$200M
$48B

17. CLOUD KITCHEN – CONSUMER TRENDS
A very young Indian population is driving the major trends in Food Service industry
INDULGENCE FOOD HEALTHY / ORGANIC
FOOD OPTIONS
REGIONAL FLAVOUR VEGAN MOVEMENT
India’s migrant
population40%
Regional food forms synonymy
with home for the migrated
diaspora within country.
With migrant population
steadily growing, ‘Regional
Food’ is here to stay.
Personal disposable
income growth rate11%
Personal disposable income has
grown (11%) faster than median
household income (7%).
Indians are spending more on
chocolates, desserts, dairy
products, etc.
Median age of
India in no. of years27.6
The millennial generation is
now health conscious and
invests heavily in maintaining a
healthy lifestyle.
The median age of India will
remain below 30 till 2020.
India’s vegetarian
population29%
As more people are getting
online, demand for vegetarian
option is rising as well.
Most populous states of Uttar
Pradesh, Rajasthan, Madhya
Pradesh and Gujarat have 50%+
vegetarian population.
OPPORTUNITY SIZE LEGEND HIGH MEDIUM LOW 17*Source – Primary and secondary research

18. CLOUD KITCHEN – SUPPLIER TRENDS
Healthy margins and better quality assurance is driving a move towards Cloud Kitchen model
18
AGGREGATOR
PARADIGM SHIFT
RESTAURANT
PARADIGM SHIFT
HUB & SPOKE
MODEL
AUTOMATION &
SUSTAINABILITY
Delivery time as
low as 20 minutes20
With a central kitchen
combined with delivery hubs,
delivery times as low as 20
minutes can be achieved.
Petoo is experimenting to
achieve 10 minute delivery
Top 2 Aggregators
with Cloud Kitchen
Zomato and Swiggy have both
announced infrastructure
investments as their Cloud
Kitchen project
Market share for
delivery orders35%
Restaurants derive direct
benefits from reducing
operation cost, maximising
orders per day, decreasing
overall production and
packaging time and capitalising
on existing user base
Reduction in
processing time10%
Automation in preliminary
activities in the kitchen is
enabling cost and time
optimisations
Sustainable packaging options
is becoming a customer
acquisition driver
OPPORTUNITY SIZE LEGEND HIGH MEDIUM LOW*Source – Primary and secondary research
2

19. HUMAN
DESIRABILITY
4
WHAT’S IT ABOUT?
CLOUD KITCHEN
ADVANTAGE
EMPATHY FRAMEWORK
TOP PLAYERS
TWO BY TWO
DESIGN
THIKNING
5
DEFINITION
FOOD INDUSTRY VALUE
CHAIN
MARKET SIZE
ADDRESSED MARKET
CONSUMER TRENDS
SUPPLIER TRENDS
CLOUD
KITCHEN
2
INTRO-
DUCTION
1
STARTUPS ARE FAILING
RISE OF DESIGN IN
STARTUPS
RISE OF DESIGN IN VC
RISE OF HUMANS
DESIGN THINKING
19
UNIT ECONOMICS
CLOUD KITCHEN
ADVANTAGE
TOP PLAYERS
BUSINESS
VIABILITY
3

20. BUSINESS VIABILITY – UNIT ECONOMICS
Cloud Kitchen Business Model Combines Margins across the Stack to deliver lucrative opportunities
20
$1000–1200
Per Month
RESTAURANT COST
CLOUD KITCHEN
MARGINS
RESTAURANT
AGGREGATORS COST
70%
-
$6000–8000
Per Month
0%
-
$3000–3500
Per Month
30%
Over Restaurants
$1M
Per Month for
1500 employees
-
0%
$3M
Per Month
-
0%
$1M
Per Month
$1000–1200
Per Month
0%
$100,000
Per Month
$7–8
-
$5–6
-
-100%
$3M
Per Month
3000 – 4000 orders per month for a restaurant
3,000,000 orders per month for an aggregator
25% For 150 orders a day from 1 Kitchen with $6 AOV, Cloud Kitchen business model promises a margin on the upwards of 25%
PROPERTY GROCERY CHEF & STAFF DELIVERY PROCESSING &
SUPPORT
AVERAGE ORDER
VALUE (AOV)
COMMISSIONCUSTOMER ACQUISITION
COST (CAC)

21. 21
BUSINESS VIABILITY – CLOUD KITCHEN ADVANTAGE
The business model provides some obvious and viable earning options along the service line
PROPERTY GROCERY CHEF & STAFF DELIVERY PROCESSING &
SUPPORT
AVERAGE ORDER
VALUE (AOV)
COMMISSIONCUSTOMER ACQUISITION
COST (CAC)
• Savings on infrastructure
investment
• Reductions in service
time through kitchen
automation
• Better quality control of
food cooked
CLOUD KITCHEN
ADVANTAGE OVER
AGGREGATORS
• Higher
consistency
in food taste
CLOUD KITCHEN
PROCESS FLOW
CLOUD KITCHEN
ATTRACTIVENESS
• Lower
delivery
times due to
distributed
cooking
• Higher customer retention
due to better control of
quality and taste
• More contextual customer
data in terms of food
preferences
• Competitive
pricing
strategy due
to higher
margins
• No
commission
revenue
ADVANTAGE LEGEND BETTER SIMILAR WORSE

22. Cloud Kitchen $0.6M - $3 1,000 -
Cloud Kitchen $0.5M - $15 70 -
12 40%
3 35%
22
BUSINESS VIABILITY – TOP PLAYERS (1/2)
A representative set of players in the Cloud Kitchen space mapped against critical business parameters
Cloud Kitchen
BUSINESS MODEL REVENUE
Last Announced
LOSS
Last Announced
AVERAGE ORDER
VALUE (AOV)
CUSTOMER
ACQUISITION COST
(CAC)
DAILY ORDERS
Cloud Kitchen
& QSR
Cloud Kitchen
& QSR
$5M
$9.5M
$4.3M
$5M
$17M
-
$5
$4
$4
12,000
25,000
12,000
$1.5
$2
-
Cloud Kitchen $0.4M - $8 2,000 -
REPEAT
CUSTOMERS
35
175
60
50%
-
85%
10 -
KITCHENS /
DISTRIBUTION
CENTRES

23. 23
BUSINESS VIABILITY – TOP PLAYERS (2/2)
Most successful startups have high repeat customers and highly optimized kitchen utilisation or spread
High repeat customers50%
Triple the average value per
kitchen
$150K
High daily orders25K
Very high spread of kitchens175
Very high repeat customers85%
High spread of kitchens60
Very high AOV$8
Low value per kitchen400K
Average repeat customers40%
Low AOV$3
Triple the average AOV$15
Triple the average value per
kitchen
170K

24. TWO BY TWO
DESIGN
THIKNING
5
DEFINITION
FOOD INDUSTRY VALUE
CHAIN
MARKET SIZE
ADDRESSED MARKET
CONSUMER TRENDS
SUPPLIER TRENDS
UNIT ECONOMICS
CLOUD KITCHEN
ADVANTAGE
TOP PLAYERS
CLOUD
KITCHEN
2
BUSINESS
VIABILITY
3
INTRO-
DUCTION
1
STARTUPS ARE FAILING
RISE OF DESIGN IN
STARTUPS
RISE OF DESIGN IN VC
RISE OF HUMANS
DESIGN THINKING
24
HUMAN
DESIRABILITY
4
WHAT’S IT ABOUT?
CLOUD KITCHEN
ADVANTAGE
EMPATHY FRAMEWORK
TOP PLAYERS

25. HUMAN DESIRABILITY – WHAT’S IT ABOUT?
Cloud Kitchen service is about convenience more than anything else
25
Online food ordering is a decision
making process which can be
attributed following characteristics
Quick decision making process
CONVENIANCE
Most popular one-word description for online food ordering service
Impulsive decisions as opposed to
rational
High engagement frequency

26. 26
HUMAN DESIRABILITY – CLOUD KITCHEN ADVANTAGE
The business model provides a lot of advantages along the user journey
AWARENESS
DECISION
MAKING
ORDERING DELIVERY CONSUMPTION LOYALTY
USER JOURNEY
STAGES
Situations of need
generation
Pre-order decision
making process
Picking an app and
ordering from it
Post-order and pre-
consumption experience
Consumption and
disposal
Customer retention;
share; feedback
EMPATHY
RESEARCH
RESULTS
Top scenarios for
ordering food online
42%
Busy with work
28%
Relaxing at home
17%
Last resort
Top factors in deciding
order
31%
Cuisine
30%
Price
22%
Delivery Time
Top experience
parameters
45%
Options
22%
Minimum taps
Top venues for online
orders
Dominos > Pizza Hut >
Swiggy > Zomato
Top features expected
in the service
38%
Real-time status
26%
One call or lesser
14%
Customer Care
Top experience
parameters
100%
Good food
32%
Reusable packaging
19%
Receive and eat
Top expectations with
service
55%
Consistency
CLOUD KITCHEN
ADVANTAGE OVER
AGGREGATORS
ADVANTAGE LEGEND BETTER SIMILAR WORSE
DESCRIPTION

27. 27
PUPROSE
IDENTIFICATION
PRODUCT
EXPERIENCE
TRUST
BUILDING
HUMAN DESIRABILITY – EMPATHY FRAMEWORK
Desires along the user journey can be bucketed into three broad categories
AWARENESS
DECISION
MAKING
ORDERING DELIVERY CONSUMPTION LOYALTYSTAGES
Feature addressing top reasons for the
user to use the product:
• Cuisine based offering
• Competitive pricing
• Customisations
DESCRIPTION
EMPATHY
FRAMEWORK
Features simplifying use of product,
making it highly intuitive:
• Minimum tap processing
• Reliable delivery
Features ensuring customer retention
for the service:
• Impressive packaging
• Feedback system
• Consistency in quality
Situations of need
generation
Pre-order decision
making process
Picking an app and
ordering from it
Post-order and pre-
consumption experience
Consumption and
disposal
Customer retention;
share; feedback

28. 28
HUMAN DESIRABILITY – TOP PLAYERS (1/2)
A representative set of players in the Cloud Kitchen space mapped against critical human desirability parameters
Cloud Kitchen
Cloud Kitchen
Cloud Kitchen
BUSINESS MODEL PURPOSE IDENTIFICATION PRODUCT EXPERIENCE TRUST BUILDING
Cloud Kitchen & QSR
Cloud Kitchen & QSR
Cloud Kitchen
FRAMEWORK LEGEND HIGH MEDIUM LOW

29. 29
HUMAN DESIRABILITY – TOP PLAYERS (2/2)
Most successful startups attribute success to a clear cuisine based positioning and reliable delivery
One of the most user friendly app
Top notch packaging and delivery service
Position cuisine based brands on its app
High delivery estimation rate
Quicker than average delivery times
Specialises in meals for corporates
Positioned as a supplier of healthy food
Attractive packaging
Budget meal option in Indian cuisine
Low delivery time
Very clear positioning in terms of cuisine
Very high delivery times

30. DEFINITION
FOOD INDUSTRY VALUE
CHAIN
MARKET SIZE
ADDRESSED MARKET
CONSUMER TRENDS
SUPPLIER TRENDS
UNIT ECONOMICS
CLOUD KITCHEN
ADVANTAGE
TOP PLAYERS
CLOUD
KITCHEN
2
BUSINESS
VIABILITY
3
HUMAN
DESIRABILITY
4
INTRO-
DUCTION
1
STARTUPS ARE FAILING
RISE OF DESIGN IN
STARTUPS
RISE OF DESIGN IN VC
RISE OF HUMANS
DESIGN THINKING
WHAT’S IT ABOUT?
CLOUD KITCHEN
ADVANTAGE
EMPATHY FRAMEWORK
TOP PLAYERS
30
TWO BY TWO
DESIGN
THIKNING
5

31. 31
DESIGN THINKING – TWO BY TWO
Design Thinking aids in presenting an inclusive view of the market
X-Axis: Human Desirability
Y-Axis: Business Viability
STARTUPS PERFORMING
HIGHLY IN ‘BUSINESS VIABILITY’
ANALYSIS PERFORMED EQUALLY
WELL IN ‘HUMAN DESIRABILITY’
ANALYSIS
DESIGN IS THE WAY TO GO
ABOUT BUSINESS
DEVELOPMENT

32. 32
THANK YOU!
PRATEEK
PARIJAT
prateekparijat[at]gmail.com
+91 9757 417 563
LinkedIn
Behance