- His incredible experience as a founding team member and COO at RedDoorz
- How DishServe initially tried to make it easier for smaller F&B brands to expand
- The impact of global macro changes on DishServe’s original business model
- Business model iteration and starting with small experiments
- The ultimate decision to create their own brands and build their own factory
- DishServe’s three major innovations – Food Technology, Distribution, and Supply Chain and Logistics
Some other titles we considered for this episode:
- How Can We Have a Perfect Operating Model?
- Either We Change or We Die
- The Healthy Food Space Is Underserved
- You Guys are Taking Too Long, I Am Just going to Start Selling
- At First, There Was Denial
Read the best-effort transcript
Read the best-effort transcript below (This technology is still not as good as they say it is…):
Michael Waitze 0:12
Okay, hi, this is Michael Waitze and welcome back to the Asia Tech Podcast. We have Rishabh Singhi with us today, the Founder and CEO of DishServe. And I’m going to say this. I like to…wait unless I’ve got this wrong. DishServe is one word, but capitalizing the second part of the word is…Do I have that right? Yes, I love this. I do this all the time. And people make fun of me for so much. There’s something about like the way my eyes look at words, even if it’s a combination of two things. I love the way you’ve written this rich. Anyway, thank you very much for coming on the show. How are you today?
Rishabh Singhi 0:49
Thank you so much, Michael, for inviting me. I’m doing very well. And thank you for all the praises on the word. Funny story about behind. I don’t know if you would like to hear this. But so we were thinking about, hey, you know, what should we call this? And we had like, we shortlisted a few words. We are four co founders together. So we had like four people thinking about brainstorming the word and stuff like that. And one of my co founders, she’s like, Hey, you know, you guys are taking too long and this can start selling. So the first product that they sell sold as a company were puddings that she made at her own house a lot. See if, you know, things could be sold. And she’s like, Hey, you know what, this takes too long and just kind of go about it. And she kept the name, digital. And we all keep kept thinking blah, blah, blah, but we had the sale. And then like other people came along, we should call this if you’d call us like, we’ve already made a sale with this brand name. It is good omen. Let’s stick with it. Like people who like this. It’s it’s complicated to say it’s a tongue twister and make it even better. So it would stand out one day. And that’s how we started.
Michael Waitze 2:02
I love these stories, right? Because people will look at the name in 25 years and 30 years and they’ll think that there was this massive like PR and you know, company that was hired to figure out what it was and how it should be spelled and stuff like that. And it’s really just somebody going I don’t care what you guys are doing. I’m selling putting you guys can I’ll catch up with you guys later. Love it.
Rishabh Singhi 2:22
Yeah, and the domain name was available. So he’s like, Okay, perfect. We found something that sells and has an available domain works done.
Michael Waitze 2:29
Can I get a little bit of your background for some context? I don’t really know that much about you yet.
Rishabh Singhi 2:34
Sure. My name is Rishabh, people call me Rish. Prior to DishServe. I was also in the founding team of RedDoorz. And I was the chief operating officer red doors is the largest hotel company in Southeast Asia. Now we started out with standardizing budget accommodations. So we started out with two star hotels. And now we have been all kinds of accommodation solutions, right from two star hotels with three star hotels, four star hotels, villas co living, we started out the company in summer of 2015. And we were in Indonesia until 2016. Okay, and post that we started to expand outside of Indonesia, as we expanded out to Singapore, Philippines, Vietnam, Thailand, as as a chief operating officer I was responsible for taking care of PNL growth expansion, the country hates us to report to me and so on and so forth. The fun fact about my my job at RedDoorz is I’ve been to 100 Southeast Asian cities during my time at red rose in four years, and I was extensively traveling, but that kind of gave me exposure to Southeast Asia before read or I used to take take care of international business, and m&a at a company called careerbuilder.com careerbuilder.com was a leading job board and HR tech company based out of the US. It was an old company that means it was started out in 1990s. And to do all of these Superbowl ads and it was owned by the leading newspapers like USA Today, Gannett, etcetera in the US. So like a classifieds company. That was yeah, it was trying to transform itself into a tech company. When I joined, they wanted to kind of go from being a Jobs website to becoming a SASS company, and extent by joining them in 2011. So after the financial crisis, CareerBuilder was sitting on a pile of cash. So they want you to kind of go out there expand to whatever it takes to be a SaaS company. So my part of my role was to kind of acquire companies we did about 16 acquisitions in Europe in about two years and about six acquisitions in Southeast Asia. So we started out with Singapore as our first acquisition, and then did an acquisition in Indonesia, Vietnam, did a JV in Malaysia, China started the business organically, India CareerBuilder was later sold to Apolo for 2.52 Point $2 billion. Good stuff.
Michael Waitze 5:03
I want to ask you this, a lot of companies that get started get started to solve like a personal problem, I can understand the red doors thing, right? And I’m not projecting this. But my guess is at some level, people were traveling around just going there’s no place for us to stay. There’s not even a clean place for us to say there are plenty of cheap places. But none of them are good. And booking them is hard. And finding one in the next city, if we’re going to travel around is even harder, where we how do we organize this? How can we take something that’s fragmented, put it on a platform and make it just so much easier? How do we brand this level of a place to stay? That I can at least understand? What’s the problem? You’re trying to start with? DishServe?
Rishabh Singhi 5:38
Yeah, so we started this in December 2020. It was in the middle of pandemic, right. When we started out, we started out with solving the problem, where we felt that a lot of the places small places where there was like, good food, from my favorite places were shutting down. Yeah. So the small brands were shutting down, the bigger brands were thriving. And the idea that I that we started out with was that, hey, how could we help these small brands to expand by making it extremely easy for them to just plug into a platform, cook some extra food, and be able to expand without, without having to think about renting 100 places, and then hiring staff at those 100 places and training those staff and then finding equipment for those places, and then spending on marketing to make all of these places work for them, and so on and so forth. So the idea was, how can it be extremely easy for a brand to expand? Okay, so, to help when we started out in 2020, December, we, we started out with the idea of helping small f&b brands to expand with a network of cloud kitchens, that is delivery only kitchens. So what we were doing, essentially go to a brand and say, hey, you know, just just log on to our platform register with us. And you tell us how many outlets you want, we’ll go and get those outlets for you. You don’t need to hire staff, you don’t need to find the real estate, we just hit outlets. And you just need to cook some additional food in your central kitchens or your wherever you kind of mass manufacture who. And we’ll help you to distribute your food through all of these micro outlets where essentially the food will be just reheated and sold, right. And then on the other side, we would go to these underutilized kitchens, underutilized kitchens, as that’s what we wanted to find, like what’s the most underutilized asset, because we wanted to kind of go and find the cheapest possible real estate as it who we could optimize and give more value to by providing access to these brands, which were actually good. We figured out that the most underutilized asset is actually a home kitchen, a kitchen inside a house and the most underutilized human resource. Not really. And at that point of time, yes, he thought it’s underutilized. But the most undervalued probably human resource in other people’s perspective as a housewife. Because, you know, we felt that a home kitchen, a kitchen inside a house could actually be converted into a kitchen where food could be sold, and the housewife could operate it. And these small brands could get hundreds of these sports where they could supply a food neighborhood to neighborhood and we got these, we got to the songs why said hey, do you want to earn some extra cash? Housewives has their own problem, like they were not able to go out and earn money. Number one, it was a pandemic, there were already less jobs, fewer jobs. But part of the bigger problem was that these housewives were often not able to find work, less education, young children, society pressure, fair enough, so on and so forth. So by by turning their kitchens into a commercial kitchen, and by training them and you know, giving them equipment and SOP and stuff like that these were born chefs, they had all the skills needed to be a chef, just that they were so busy in providing for their families that they just they were called to fulfill their dreams. So we brought the restaurant right into into their house. This was like an Airbnb moment for us where we figured out oh, you know, just like the Airbnb guy, speaker, there’s an extra bedroom or there’s an extra bed. Why can’t we make it commercial? And there was this kitchen sitting right next to it inside the houses by currently make it commercial? Yeah. So we started to kind of go to these kitchens, standardizing them in terms of equipment, SOP, audits, hygiene, all that stuff was that expensive to do? So it wasn’t so all they needed was a couple of freezers, a microwave and the kitchen already has all the equipment, it has a gas stove, it has, it has all the utensils, etc. So all we needed was a very minor and plus, the major cost is when you kind of start a restaurant, the major cost of the kitchen level is to provide for, let’s say, the furnishings like you know, exhaust fans for the cooking equipment, like a gas stove, and so on and so forth. If you’re scaling it down to a bit where you prepare a kitchen only to process about 10 to 20 orders per day because these are small brands, they will not generate 500 orders per outlet. They will only generate 20 outlets 20 orders per outlet, which was fine. And our idea was hey, let’s create let’s district due to demand instead of 500 orders per outlet, if I have 20 outlets in the same area, the load on each outlet will be very less. And these 20 outlets can happen because there are unlimited number of houses. So we don’t need to kind of, you know, like aggregate demand or on our credit level. So we went to them and we kind of started do this. And this model kind of works with brands are very happy working with us because now when they worked with us, the small outlet in South Jakarta FnB brand in South Jakarta, who was also able to have an outlet in North Jakarta, or had multiple outlets in North Jakarta, and so on and so forth. without spending a penny on capex,
Michael Waitze 10:35
did it change their margins? Do you know what I mean?
Rishabh Singhi 10:38
Yes, this brings us this brings me to the next next point. So we ran this model for about a year and a half. Okay, though, this idea was extremely revolutionary. The margins were extremely thin for everybody in the value system, because there was this FMB brand, then there was this dish serve. There was the kitchen partner and
Michael Waitze 10:57
logistics and all this stuff. Yeah.
Rishabh Singhi 11:00
Yeah. So for the food brand itself, the margins were actually very good because they did not have to spend for the capex. So let’s say if I were to start a new, but the problem was that in 2020, the capital was cheap. And let’s say if I want to run a restaurant today, now I want to take a bank loan, but take out a bank loan today, it’s more expensive than it was in 2020. So now this model would even make more sense. But at that time, capital was cheap, which means it is very easy for me to take out a loan. So from that standpoint, case, there were four people in the chain, food delivery app was the biggest margin eater out of the four. Then there was the kitchen partner who had to be compensated well, to kind of keep them excited and ready for the job. And then DISA was doing all of this heavy lifting, and a lot of a lot of this heavy lifting, right from a what menus do you want to sell to how does the food come from the brand partner to test a central cold warehouse and then from place of cold warehouse, the kitchen or in cold chain did a lot of tech but it also was very operationally heavy. Yeah, sounds like so thin margins, operationally heavy. Third point was the small brands that we work with, we realized that the demand was high, they were not able to scale. And the reason primary reason was that they had very small facilities, they were built for smaller things. And for them to kind of go into a mass manufacturing kind of stuff would need a lot of CapEx, and they were just not ready for it. So we figured out that, oh, even if we kind of do great things for them, they might not be able to actually scale. And we would need a lot of these small brands, small, small brands to kind of, you know, run this business margins for 10. By 2022, July, macro market situation change things around as globally changed, capital became more expensive, the push towards profitability was more prominent than ever before, we realized that it was small margins by 6% margin is not going to cut it. For us to become profitable on a fast tracked way. We need about 15 20% margin. Yeah, that’s when we started to think of a What should we do it don’t do something now, probably we will not be able to survive, right? So in July 2022, we started to do small experiments.
Michael Waitze 13:12
Can I understand? Because the the key part of this to me at some level is you have these four founders, hopefully all four of you are still involved, right? I’m so interested in what those internal conversations are like, right? Because I think externally, all people see is what they read in the press about raising money and building something and then unicorns and all this noise, right? But the really interesting stuff happens in the background where the four of you get together and say, we’re growing, it feels good. But then boom, the Fed start raising interest rates, right? The macro situation changes, everything becomes more expensive, margins get smaller. It felt like everything was okay, but now the four of you are sitting around going, okay, look, we’ve got problems we didn’t anticipate. What’s our next idea? How are we going to fix this thing? Because we don’t want to go away? We have something here. But what were those conversations like and what did it lead to?
Rishabh Singhi 14:00
Wow, that’s, that’s, that’s a great way to kind of segue into this, this. It’s so I am blessed to have amazing co founders extremely rational and we knew that you know, to in order to grow our business, we inherently knew that the margins are small as we got more brands, the biggest of brands like yummy kitchen, grab, get you in daily box, mung Coco etc, used to work with us. So the brands that you see today are very big. The food tech companies, they were using us pitch was a testament that you know, this model works. And this probably was the fastest way for anybody to grow. These were things that we knew are working for us. But we also knew that our margins were very thin and it is taking a lot of effort for us to earn every additional dollar in revenue. And this was always in the back of our minds are taken over doing so many things. And you know, because given so many things, there’s so many variables in this value chain, something or the other always breaks, we’re not able to get this perfect result. So how can we have a perfect operating model? It started with that. And then it boiled down to us sitting down and saying that, hey, you know what? The first at first there was denying this denial and all four of us. There’s nothing wrong with the business. Say, look, we have big clients, we have small clients are all of our brands are so happy. But should we change? Let’s just execute it in a better way. We’ll fix it in three months, don’t worry. It’s got to be fixed. So it started with that. But I think all four of us were rational enough to say that, okay, let’s start with small experimentations, to figure out what else he could do. So we did not think of a big idea. We did not move away from what we were doing until September of last year. But we started to do those small experiments that lead to that change, and lead to that realization that started happening in July.
Michael Waitze 16:00
So what were those experiments? Can you can you share that with us?
Rishabh Singhi 16:04
Right. So we identified, what are the problems. So there were two kinds of customers that we had was mall brands, they were enterprise spreads. As the macro market situation is starting to change, there was more pressure on the bigger brands to bake more margins, and so on. And they were also funding pressures on them. So so the companies were feeling the heat, and we were losing those customers. And it was, it was perfectly rational for them to kind of reverse the price, there was additional margin that I was going to ask which they wanted to kind of preserve for themselves. And on the small brand side, they were not able to scale beyond, let’s say 1015 outlets. So we realized, first one thing that hey, you know, for for the brands to scale, we need to go or have brands, as our customers who can scale to multiple cities, who would have the capacity to scale. But the bigger brands are not really interested to work with us beyond a point because we are taking the most we would always eat into the market. So even if we scale a brand to a particular point, at some point, they would go in levers and do it themselves. So the first realization was that, what if we launch our own brands? Yeah, like would that change things? If we have, and we could maintain our own quality? We have tons of data, to know what product sales in what neighborhood at what price point will be at work? This is
Michael Waitze 17:27
completely This is why I really want to know this, right? Because this is a completely different thing, right? It’s like, instead of being a car dealer, what you’ve decided to do is just say, You know what we’re gonna manufacture on cars. And to be fair, this is kind of what the South Koreans did when they had been borrowing and borrowing technology from the Japanese that all this years of data, all this years of experience, and they were like, We have big industrial companies here. Nevermind, we’re just going to build Hyundai cars. I mean, that’s kind of what you did. But it’s a big, big change. No,
Rishabh Singhi 17:58
it was it was an It was also the fact that hey, you know, if we do not work with all of these brands, right, and if you have our own brands, it will take away a lot of complexity from our systems. But it could be a linear team, we would not need to kind of build stuff for our food f&b partners, because he would just need to satisfy ourselves. And also on the kitchen side, we start to speak with those kitchens and say, Hey, what is something? I mean, I always do that. But this is this thing where you measure NPS, where you ask people that on a scale of one to 10, the status and if they rate you nine and 10, they are your promoters. They rate you six to eight, they are passwords and iterate you one to five, then they are like naysayers. So naysayers. naysayers, would discourage you from buying the product. Passivhaus would not promote you and the voters would say, hey, you know, Michael, have you tried this? And we’ll make you try that stuff. So we measure NPS but I, I do an additional thing. I would go to people and I would say what if we shut down tomorrow? Would you be sad? Yeah. And why would you be sad? And we felt that when we spoke to our kitchen partners, and we asked them that, hey, you know, if you shut down tomorrow, would you be sad? And they’re like, yeah, it would be sad. So we felt that Okay, so at least there’s something that’s working for us. There’s somebody, somebody’s happy somebody wants us around. Yeah. So we asked them why they said that, hey, I’m able to generate an additional income, right? And without making incremental effort, which means I was in the kitchen at my house for about two to three hours every day anyway. Anyway, yeah. Yeah. So by staying a little longer, I can make this additional cash that helps me buy stuff for my family and get savings and stuff like that or have access to money which I never had, right. These housewives. They Freedom, access to money. Yeah. And in these times, it’s a great, great, great thing. I mean, this was 2020 2021. So we felt that okay, let’s do that start to experiment or two things. Number one, let’s start to work on, what if we had our own brands? What would these brands look like? How would these brands be? What kind of food? It would be? Let’s start doing research. And let’s, and how would we produce this? How would we go about this? So they will select series of experiments on this? And number two, for this kitchen partners? How can we number one, diversify our kitchen network? So how could we kind of satisfy the home kitchens that we’re dealing with, but also enable every other kitchen in the world? Really the type of kitchen? So how can we kind of expand that network? Right? And number two is what are the other things that we could automate? For the kitchen partner that the current kitchen partner does that could kind of make it even more interesting for a kitchen partner to?
Michael Waitze 20:56
Because getting really complex now? Yeah.
Rishabh Singhi 21:00
Yeah. So so we started to go to these kitchens and ask them, okay, apart from preparing food, what are the other things that you do? Right, we realize that apart from, you know, making the food, they will also checking on three different food delivery platforms, if there is an order or not, yeah, they will need to reconcile finance with three different companies, they will need to do inventory checking, they will need to check inventory, they have it or not have it if they have it, and they need to close that inventory, onto a food delivery platform, when they get it back as stock, then they will open it again. So they were like there was a cooking part. And there was everything else. And everything else was also consuming energy for these kitchen partners. And we decided, okay, let’s note everything down. Let’s try and see if we could automate all this stuff. And make it make the kitchen partner quality, do the cooking, that would take away a lot of pain. From them,
Michael Waitze 21:50
it seems to me and again, tell me where I’m wrong here that this is your what’s the right word? This is your wheelhouse you love solving this type of problem, don’t you? I mean, you personally but also your team, you’re like, Okay, this is super complex. There are a lot of moving pieces. We know the technology can solve this. We love doing this. Is that fair?
Rishabh Singhi 22:11
Extreme. This is exactly where we were we were pushed against the wall, we had very little money in the banks. And we knew that if we don’t figure this out very quickly, we are going to have a very bad time. Yeah. So we knew we need to do this. So there was this pressure of there was definitely the problem and the excitement of solving it. But there was also this pressure of solving it extremely fast. Yeah. So there was these, both of these things acting on that, and I love doing this. I’ve done that in the past. I can share an example with Tommy Tommy. So while I was at RedDoorz, and we started RedDoorz in 2015, we started RedDoorz. The first time when we came to Jakarta to start RedDoorz, we were in an apartment in central Jakarta. And we rented an apartment, a service apartment. And then we said, oh, this service apartment is so good. And there are no service. Other service apartments like this, let’s just do service apartments. That was the first idea of rentals. So we rented out 10 service apartments in that building, and hired like a bunch of staff who could do cleaning, etc. And listed them on a leading travel platform in Indonesia. And algo does the booking dot coms and everybody else. And you start to sell the service apartments online. And you wouldn’t believe they were selling like hotcakes, because they will no service apartments. And like who will promise the five basic things that we promise that it’s going to be clean the toilets gonna be clean by bedsheets, that sort of TV and stuff like that, which is like great. So we figured out that this is going good. So instead of 10, like in two or three months time, we got to 20 apartments, and then 20 became 30. And then by December of 2015. One day, we got a notice from the apartment, building, building building management. And they invited us to meet them, we went to meet them. And they said that we’re throwing you out doing this stuff. This is residential. What the hell are you guys doing? This is creating a lot of chaos and security problems for us. And we cannot allow this to function. So we give you 24 hours to wrap this stuff. We like to keep the guests staying 24 hours. And in about two or three days time, the biggest travel company in Indonesia banned us from their platform, right? They said they don’t want to work with rentals. So now we had no supply and we had no demand. And we had to figure it out the whole business from scratch. And that’s how we went to hotels and we standardized the hotels and we built red dots.com to generate our own demand and then Kratos became better. And we had very little time to fix it because again, there was always this pressure of cash in the bank. Right. So yeah, I
Michael Waitze 25:01
love that story. By the way, that’s so great. But again, this is the backstories that nobody ever hears, right? Because it just doesn’t look like that from the outside. Yeah.
Rishabh Singhi 25:10
From the outside, we always had a brave face like, Yeah, we did this, we always knew it. But there’s always a, there’s always somebody pushing you to kind of innovate. And then, sorry, yeah, so so we went to these kitchens. And we figured out that what are the things that we could automate? And on the brand side, we started to research and what kind of brands will be one? So we the first thing that we realized on the brand side was that the food market is extremely crowded, and you know, this this food brand, online, or grab food or go food, etc. It’s merely a listing. It’s not really a brand. It’s a commodity. Yeah. So if the aggregator or the food delivery app wants wants you to be visible, or the algorithm wants you to be visible, you will be visible because there are 40,000 other brands selling food. Yep. So the entire game is on visibility, and discovery. Customer word discoverability. So if you’re able to get discovered, the customer would eventually see you and want to try because we all want to try new food. But if you’re just not visible, you will not so it’s a commodity sort of brand, then the competition is very tough. There’s like, there’s nothing unique to be sold. How would you then create a brand that would stand out and be different from 10,000 Other people selling the same thing? And number two, if you were to, let’s say we are able to create this brand, how would we make sure that every time this item is sold to the customer that it tastes exactly the same?
Michael Waitze 26:39
Right? I mean, this is this is the McDonald’s, what’s it called french fry problem. This is how simple it came so wealthy, he was like, Don’t worry about the potatoes, I’ll take care of the potatoes. Every potato you get will be standard as the potato, and I will distribute all of my potatoes everywhere in the world exactly the same. I guarantee it right. This is a hard problem to solve. Sorry, go ahead. Yeah.
Rishabh Singhi 27:02
Exactly. So like we were McDonald’s was our was our inspiration to do this. I mean, like we said that every dollar spent if McDonald’s can do it, we could do it. Yep. So so that was that was it. And then a third problem. So the first one was how we create a brand that stand out. Number two is how do we how do we make sure that the food is consistent? Yep. And number three is that when we become big, and if we become big, our costs should go down, and it should not go up? Yeah, it means this is scalable. Every dollar every incremental dollar that we invest in this business should give us an incremental return.
Michael Waitze 27:39
I was gonna say this gets back to the margins we were talking about before, right, because now you control the margins. This is one of the things that I wanted. This is why I wanted to have this conversation. Because before you were at the mercy of the other providers, but now you owned the entire margin, which means you can move it around and create it wherever you want. Go ahead.
Rishabh Singhi 27:57
Exactly. So the first thing that we did is a visit. In order to be standing out we felt that while the food space is crowded, the healthy food space is underserved. Got it so there are a few healthy food brands out here in Indonesia. Healthy food is something that the world is moving forward with healthy food is the future of food, be it healthy food or vegan food and healthy vigor is not the same thing in vegan food which is not healthy yet. But healthy is healthy, and how can we make the mass population move towards a healthier alternative right? Healthier healthy food is the future the our food should be healthier than what’s available today. Number two is in the healthy food space as well. We realize that there are a few brands in Jakarta or in Bali but largely in other parts of Indonesia there are no new healthy food racks absolutely no healthy food brands so that means there’s no competition whatsoever. Even in Jakarta and Bali the kind of brands that we have there are very few in fewer districts. And so the first problem was about accessibility so healthy food is not accessible currently. Number two is healthy food is currently not affordable healthy food right now is of the rich for the rich by the rich Yeah, it’s a two $10 price point, sir McDonald’s price point. So it’s not available for masses. And number three is Healthy Food is not tasty, healthy food currently Saturday. And you know people eat healthy food because either their self care or they’re trying to watch their way. So the first thing they asked me hey, what do you want to eat? People say pizza KFC or something like that. So nobody ever said I’m gonna use like, you know, salad out of their own choice unless if they say salad in the next question. People are asking why.
Michael Waitze 29:52
Or what are we doing after that? I mean, because this is you have a salad you’re like, Oh, now let’s go get something good kind of thing.
Rishabh Singhi 29:59
Yeah, So they like, but it was, it would never be somebody’s first show. So so we figured out, okay, so these are the three problems that we need to solve, we need to make healthy food more affordable, we need to make healthy food accessible to all. And we need healthy food to become tasty. And on the production side, we figured that if we were to do our own brands, we need to have a McDonald’s kind of a factory. So we figured out where McDonald’s food is produced, we went to the factory. Did you really? Yeah, yeah. So like,
Michael Waitze 30:30
I’ve never been inside one of those factories before.
Rishabh Singhi 30:33
Yeah, so the one we don’t does is that they have their master franchises. These master franchisors then called attract with, like a big factory would then like mass manufacture food for them. And this food factory is, is also in Jakarta and be the way we’ve kind of been for that is that, hey, we want to place like a big order and you want to see your factory. And it took us about a month to get access to them because their hands are full. They don’t want to produce so we so we realized two things while we did. Number one, if you were to mass manufacture, these factories are not even interested to work with us because their tummies are full, like McDonald’s, give them big contracts, their demand is stable. And they’re happy. They didn’t notice startup, like they’re not hungry to grow this like a family business. Yeah. So number one, if we were to do this manufacturing thing, we would do it have to do it ourselves, because we can’t rely on current OEMs to manufacture for us because they’re very long cycles. And it’s very difficult to work with him for a startup. And number two, we kind of went there and we saw the stuff. And we realized, oh, wow, this is amazing. This is how food is mass manufactured. But like this is extremely huge to take this inventory risk early on would be like very risky. How can we scale this factory down? Right? So that it still remains a factory, but it’s not as big of a factory as like. So then I started to do my research. I’m an engineer by degree. So I started to do my research figured out what are the machines that we need kind of a scaled down version of the factory, I designed our factory. So we first figured out that we need to do a factory ourselves. So we figured out a plot a place where you could set up the factory and stuff like wait a second, and
Michael Waitze 32:14
let you just say I designed the factory myself and just like let it run. This is so complicated. I was thinking about this before we started recording. I meet people all the time. They’re like, yeah, we My family has a factory that does this. And I’m like, Okay, that sounds great. But like, I don’t know anything about a factory. How did you design a factory from scratch?
Rishabh Singhi 32:35
Yeah, that was a great question. I mean, I’ve watched a bunch of YouTube videos. Oh, yeah, that Okay. That sounds absurd. But this is this is the this is the truth. I thought to myself, so I knew that there are certain areas. Yep. And we also hired HFP, we were cognizant of the fact that the current skill that we have in the company, we don’t have like a pure chef. Yeah, we got a very senior guy, 15 years at Hilton. And then his last, he was a co founder of the last company is called that viral abnormal. They sell 1 million Nasi Goreng per day in Indonesia. It’s all this company, and extremely driven young guy. And I told him about how we are changing the world, like how healthy food should be right? You know, like running water accessible for everybody. Stuff like that. He was moved by my vision.
Michael Waitze 33:30
But what are you doing about what are you doing about cash during this period of time? Because so far you haven’t mentioned raising money? You haven’t mentioned angel investing? You haven’t mentioned anything. All you said was we felt like we had a problem. And we’re just went to solve it. And now you’re building your own factory? Like how did you manage all the cash and stuff to
Rishabh Singhi 33:46
still running our old business and our business do had small margins, but it was still contribution margin positive. Okay. It was not a bad business. It was just that the path to profitability on a beta was extremely low, extremely long. So they were still not losing tons of money. Okay. And by the time so far, we had already raised about $3.5 million. Okay, so our seed oil was a million dollar. And then we kept raising money. When the times were good. We had some cash, but we had, by the time, July came, we had about, we had the last million in the bank. So we weren’t take all drastic measures and stuff like that. But we had a curriculum business was running. So and all of this while I’m talking it seemed it was taking a long time. But all of this happened within about two weeks time was like compressed in about two weeks. So it was time we were able to figure out what are the problems of the kitchen phase, we need to launch our brands we need to launch healthy brands this go to the price point. This our factory works this out should be designed, recall a person on board who would help us to run that factory and so on and so forth. So we got experience, people who would figure out how the factories to be run and stuff like that he has seen factory before while I was designing that he was able to give inputs, okay, we need this area, this area, this area, this area, this area, then we got a consultant who has built a lot of factories. He’s like a contractor. So he was able to say point out stuff that we missed that, hey, yeah, you know what you need an drainage concrete here, that’s missing, you need this. So with help of a lot of people, and with a broad idea of what we were trying to do, we knew how the factory is going to be designed. And then for the machines, that was my own research where I could figure out machines from here. And then we imported a bunch of machines from Germany and Taiwan, and to bring these machines to Indonesia as input was difficult, but we did it. And then the factory came together, it took us, it took us a while to kind of build this factory. And out of the million dollar that I told you that we had in the bank, we spent $750,000, in making that factory. And I think that was the smartest decision that we took, I know, it was very bold, that we put 75% of the money that we had less capex, but we felt that if you had the factory, we would have a business, if you don’t have the factory, we won’t have the business
Michael Waitze 35:57
and what was your conversation like with your investors at this time, too, right? Because you know, the investors had invested in this thing over here. And then they see in this two week period of time, all this activity around building your own factory, they must be thinking, okay, these, these people are insane. At some level, I know that there’s a back and forth, and I’m exaggerating a little bit to make the point, right, but they did give you the money to invest in X, and you’re just going yeah, we’re just gonna go the other way, we’re gonna do be like, we’re not even close to x anymore. We’re gonna build our own brands, we’re gonna make our own food, we’re gonna have our own factory. That’s cool. Right? And but really?
Rishabh Singhi 36:32
Yeah, I think I think this was, this was a time when we were having these conversations extremely openly and transparently with our investors. So I would get on a call, and I would tell them that, hey, you know what, we have a problem with our business, the margins are extremely thin. Yep. But two ways to do this, either. We need more cash now. And right now with the market, that is, I don’t think we could raise more money, unless something drastic happens. And this is an I would go on investor calls, I will record that feedback. I made an Excel sheet. And I presented the Excel sheet to people that hey, you know, this is the Excel sheet. 80% of the investors are not investing right now. Right? So here is the problem, we don’t have more cash flow. So either we change, or we die, right? So we need to make this change happen. And our investors been extremely supportive or supportive of this. And they would say, Hey, let me connect you building a factory, let me connect you to this guy. You need machinery, let me connect you to this guy. So they were giving me help with the resources that they could call. And also the fact that I was clear that he were taking this risk, but we’ll take it calculatingly Meaning like will not shut down our business. The current existing business instantly, right, which means they started from July 13. But we closed our previous business only in September. So there was this time where he was still running their business unless we had 100% conviction that this is the way to go. And by September that came, we got this factory, we started to run this factory, we knew what brand we want to build, we build that brand. With a healthy food brand priced like McDonald’s factory allowed us to mass manufacture consistent food on the food technology. Now, all of this let me kind of crystallizes into three basic pillars of what we did go ahead. This is our three innovations. The first innovation is on the food tech. So we we were able to mass manufacture food that was consistent in quality, preserving the nutritional value of the food having a kickass cooking process that produces food with a calorie control. Nope, no sugar, no MSG. No no sodium, calorie controlled kind of food with great nutritional value and elongated shelf life of about six to nine months you patent Yeah, so our our our factory machinery and our cooking process allows us to produce high quality consistent food with a higher shelf life, longer shelf life and great nutritional value. And number two is that this process also allowed or ensured that the cooking process at the end kitchen it’s extremely simple five to seven minute reading process. Yeah, it’s got to be simplistic right because it’s exactly was as simple as putting together a bourbon Yes, that’s how the consistent is the end customer would be so our food tech innovation led to these two basic outcomes. Then comes our distribution, Logistics and Distribution technologies while we were running our own business, we were building our Logistics and Distribution technology any which ways which allow came in handy. So every food item that came out of our factory was QR coded. So we were able to track food into the supply chain right up till when it goes to the kitchen. And let me let me explain you the how the food business works. So the food and food business the only way you can reduce costs is not by reducing ingredients because you calculate something it’s 100 grams of butter. You can’t add 90 grams of butter because then the taste changes the Only way to make more margin is to reduce the stages. And most of the wastage is happens during the supply chain, or due to expiry. And so
Michael Waitze 40:08
I was just gonna say I didn’t want to interrupt you. But I want to get back to this idea of you went to these homemakers right and said, How can we automate all the things that you’re doing here. And yet, what you did is you abstracted that all of that away from them, and then just went and did that yourself. Right? So that they didn’t have to worry about ordering, they don’t have to worry about anything, all they had to do if they were still involved was just like, pop it into microwave, boil it, reheat it or do whatever. And then it was done. And because now you control the ordering process as well, you can reduce your waste to a rounding error as opposed to 10 to 15%. And that 10 to 15% then stops eating into your margin and becomes profit. Yeah.
Rishabh Singhi 40:47
Yeah, so absolutely. So that that that exactly brings me to the third point, the second innovation was around supply chain logistics, supply chain logistics, integration allows us to track wastages apply Feefo on our old warehouse, so that the expired items would go first. And number two, it also allows us to understand demand at every outlet level. And at aggregate level to then that then goes as input to our factory on how much to produce. And it also goes as goes into our logistics team on how much to each outlet. That reduces basis. And then the third one was a distribution technology. And this is where the kitchen app comes into picture where we found out what are the all the problems with the kitchen, we loaded it down and we automate all of this, here is what we did on that we integrated on API’s with all the food delivery apps. So all the orders from different apps would come in one app, which is this app, then we automated the financial reconciliation, as Yeah, we automated financial reconciliation process, we automated the service, the automated marketing, we automated inventory management. So when the when the kitchen partner gets the inventory, they just need to scan the QR code and the inventory automatically fills in. So that means they don’t have to count manually, that doesn’t waste time anymore. And so we automate all the things that they were doing, except the cooking stuff to do anything else was automated to this one app, which is called the dish kitchen app. So we automated that. So now these three fundamental points are the food tech, the distribution tech, and the supply chain logistics thing that allowed us to create the business that we are in today. And also the app that we created for the kitchen partners or not, was not only useful for delivery only kitchens, sure, but was also useful for dining kitchen. So we started we started diversify, you also go to cafes, and stuff like that. And
Michael Waitze 42:37
I was gonna say that this is this is an application that I’ve been waiting for for years, right, because you walk into any cafe today, and they’ve got like 16 Little terminals. And I just think this is going to drive everybody insane. The real business that wins here is the platform that consolidates all of that fragmentation into just one order panel, you don’t really care if it’s Company X, Company Y company Z, all you cares, you have an order, and they’ll come and pick it up and build that for you, Lisa, that’s for you and just leave that’s a business in and of itself.
Rishabh Singhi 43:04
So we did that. Not only that, but also for dining orders, QR code, the customer scans, the QR code places the order order goes directly into the kitchen, no need for a catcher or something like that. So so we did did all of that on on that front. And the result of this was that we created that one brand in July, it’s called kidfit. And by September, it was doing about $50,000 in revenue. That’s where it is about 50% of our revenue from all other brands combined once a month. So So in about three months, we went from zero to $50,000 in revenue for one brand. And all the other brands used to work with cumulatively gave us $50,000 in it so like about $100,000 in revenue. So we’re like okay, this seems to be working. Yeah, this seems to be working. And now is the time when we reduce our costs. We lose the other brands business, we let our our teams go leaner. And and just stop that business completely. So in September, we stopped all that business completely. By December this one brand that we prevent with reached $100,000 in revenue. And that’s when we decided hey, this is working in Java, the topic let’s launch other cities they serve was now 30 People company only only 30 people including the factory, the tech, the ops etc. Everybody were 30 people simply start to expand. Here we start to expand, did not hire anybody new, was able to seamlessly expand we now operate in 10 Indonesian cities. We have 200 plus kitchen partners. Now we have all kinds of kitchens that work with us, be it delivery only kitchens, small cafes, restaurants and stuff like that. We launched one more brand in January. It’s called Loving Tokyo. It’s a Japanese healthy food brand. And that brand, also following the same growth pattern as kidfit
Michael Waitze 45:01
How do you handle the Discovery now, though? In other words, when people go on to the food ordering app, so they’re going on to a DishServe app just to get just to look at the brands? Are you still mixing with all the other brands? They’re still trying to figure out? Or are you just dominating the health category? And when people press the Help button, there’s like crickets and your brand.
Rishabh Singhi 45:19
Yeah, these are all great questions. Let me let me kind of answer this. Right after I finish. The previous thing. The other thing so so loving Tokyo, the healthy food brand that we launched following the same trajectory, in February, we launched one more brand called Uncle time, it’s a healthy fast food brand, burgers, steak, etc, but all Hildie also following the same trajectory. So what we learned during this way, is that how to how to replicate success of one brand to subsequent brands, which is an extremely difficult thing to do. I mean, like, not a lot of brands have been able to do this. And we have been able to do this scientifically, because we’re playing in that healthy, healthy space. But more importantly, is that all of our food is like regular food. But it’s a healthier alternative. So it’s like Japanese food, normal Japanese food that you say groggy and stuff like that. But it is all a healthier version of it. So customers discover our food, right? When they’re looking to eat Japanese, they see Japanese, they see a few things, but they also see one listing that says healthy Japanese food. And they’re like, this is that’s just do this, and then see the prices. They’re like, Oh, it’s priced, like a normal food, but it’s healthier. Why should I eat something else? Why should I not eat the healthier alternative? So for the customer, the choice is that the food tastes like amazing normal food is priced like normal food, and it’s available closer to me. So all of our, the way we are spread geographically, today, no matter where you are in the cities that we operate in, there is a digital outlet in less than two kilometer radius near you. So that means the customer gets the food in less than 25 minutes. The best one in the industry was Domino’s, 30 minutes of free, we are able to do that in 25 minutes, because we are just hyperlocal. Now coming to your question, how does the customer? What’s our sales mix look like? So yes, number one is customer discovers to our listings, but our listings are able to stand out because of the healthy component. And yeah, so it’s not normally full price, etc. Number two is also started to show.com in January, this year. So this.com The first time we started it, we were like, hey, you know what, it’s extremely expensive to build traffic on tesla.com. The Super App, the CACs are very high, blah, blah, blah. One thing happened in our favorite was because of the smart macro market situation. The food delivery apps also start to rationalize their discounts. Right. So this was an opportunity for people like us who wanted to build their own directory.
Michael Waitze 47:42
It had to happen. It had to happen. Sorry, go ahead. Yeah,
Rishabh Singhi 47:46
it had to happen. And I have seen this happening at RedDoorz. We were listed on Agoda booking.com, travel Loco and all these people, the big red doors.com. And I and by the time I was leaving about 80% of the bookings came through RedDoorz,
Michael Waitze 47:59
right? Yeah. Yeah. Again, margin control, you control the margin yourself.
Rishabh Singhi 48:04
Exactly. And customer loyalty man, when customers buy from red.com, they will pick a red dwarf Hotel. So they should, there is no chance of so they’re more loyal to you. So we we we figured out so.com We launched this a.com. So in the first month itself, we broke even on cost per order basis. That means every order that we got from daiso.com was profit, got it even after taking out the CAC and we integrated with like Lala mu and grad Express etc for the last mile. So when the order comes through desert.com It’s being fulfilled by Alana mu or plant extracts or something of that sort. But even after taking away all of this, we were able to because we produce the food, we sell it directly we had the margins, we were able to offer a discount to the customer to switch the platform at the same point of time making the margins and the khaksar looking good as well. sustainable. So traditional.com came along and we realized two things are on a brand level, because by now we have three brands. So at the brand level, or repeat rate is 26% monthly repeat rate, meaning in the same month, 26% of the customers eat us again. Wow. So and then it isn’t the brand level. But on the company level, because we have three brands, that team 9% of the customers repeat on a monthly basis. Because if they take it fit and they will also try loving, okay, they will also try and quit and so on and so forth.
Michael Waitze 49:24
But did they know that all those addicts serve brands? Do you know what I mean?
Rishabh Singhi 49:27
Yes, then. Yeah, they know it. Because every time they get the food delivered the packet immediate comm says just got it.
Michael Waitze 49:34
Okay, because that’s important, right? For a brand loyalty perspective. Do you use tech as well to enhance the loyalty right order 10 Get One Free kind of thing or just, you know, loyalty points or some kind of thing like that as well.
Rishabh Singhi 49:46
Yeah, so that happens on december.com. So on diesel.com Our repeated is 45%. So so
Michael Waitze 49:55
go ahead. I’m kidding. I’m kidding.
Rishabh Singhi 49:59
Go ahead. Oh, What we try to do but yeah, so that is why the cats look great because on the cost per order basis because the customers repeat, we are able to kind of, you know, breakeven on that. And the reason why this happens is because just the customer experience, the customers comes on desert.com, and figures out all their all of these healthy food brands as well. I never knew that it would be this healthy, or I never knew the fried chicken could be handy, because the fried chicken is organic, and not cooked in palm oil cooked in coconut oil, and so on and so forth. And this is a healthier alternative version of a fried chicken. So customers kind of that’s the reason why they will repeat. And as we stand, as we talk today, we are also launching one more brand, it’s called check as it’s a Korean healthy food brand. How do you spell check as thick SS. It’s like you guys, but But you guys got it. So we’ve kind of figured out how you would make a launch brand after brand after brand. And they all follow similar trajectory, and how we could kind of launch kitchen after dinner to kitchen. And it’s extremely scalable for us. So our effort to onboard a new kitchen has to be extremely small as compared to the incremental dollar value that we get out of that.
Michael Waitze 51:15
How about the factories though?
Rishabh Singhi 51:17
The factory Yeah, so the factory is now up and running extremely good.
Michael Waitze 51:22
But you have 10 cities, right? You have factories and all those cities because otherwise, factory you have one factory
Rishabh Singhi 51:26
is one, the factory will always be one in one country. That’s how it is going to be Yeah. Because if you do not standardize the process at one place, it’s the pre cooking process at one place, you will not be able to take advantage of number one low CLGs because you will procure in bulk at one place. Yep. Number two, a process that is replicable. And there is no mistake in the process, the more factories the more chances of mistake. And number three, adding one machine in a factory would give you a better output. Because there are some of the things that you would need to replicate which do not directly contribute in production like like waste disposal system, or air ventilation system, etc. These are additional costs of every factory level. So if you have paid lots of factories, you pay for all of these overheads, for no for no for no real reason. So we would want to have this one factory and current factory has a capacity of about 400,000 items produced per month, and which we would exhaust by the end of this year.
Michael Waitze 52:27
Next week, just feels like it’s growing.
Rishabh Singhi 52:31
Yeah, it was growing so fast. And we had two people on so when you launch factories in their production lines, they start with one production line because we had one brand, we said, okay, let’s launch another brand, but we will just use the same production line. But we were wrong, we had to set up another production line because the demand for that other brand was so high that we had to launch. So the entire capacity would be would saturate at 14,000 items by the end of this year. But the good part is that by September this year, will break even on profitability. So we’ll be we’ll be a bit positive by September, we’ll be profitable as a company, we now have a clear path to profitability. And business just looks in a much better shape. The margins are amazing. Customers are happy, our kitchen partners are happy.
Michael Waitze 53:14
Okay. I want to let you go there. But the last thing I want to ask is this. What now are the internal conversations? And is there some sort of, you know, you can like now stop holding your breath about are we going to survive? Because before you said, we either do this or we die, right? Either we change or we die, you’ve changed, you haven’t died? What does growth from an from a local to regional standpoint look like to you as a team? Or is or is Indonesia itself just such a big market that you’re satisfied for now being there? Do you think about expanding outside of Indonesia? Because the model should work everywhere? Yeah.
Rishabh Singhi 53:53
Absolutely. I think this model would work everywhere. And and while we do have dreams, and aspirations, I would say aspirations or dreams, we do have aspirations to kind of have a pan Southeast Asia business. But I think for the next couple of years, we’re pretty focused on Indonesia. And the way I see expansion is, is broken into three, three parts. The first one is geographical expansion. Yep. So we now operate in about 10 Indonesian cities. By the end of this year, this number should double and we should be at least in 20 to 25 Indonesians. So that’s that’s number one. The second is product expansion, which means we have Yeah, we have about three, three brands. Fourth one is launching soon, but we should have about 12 brands. And the third one is is our kitchen partner. So currently we have these delivery only kitchens and we have a few cafes and restaurants and yeah, this is something which is which is the most exciting thing that I’m working on these days, which is we’ve got a few cafes that so we go to a cafe owner it’s a small 15 to 20 seater cafe. The problem with this cafe owner is that he He’s a nameless, faceless, brandless place, he has real estate people come there, he will always have lower margins because he’s not brand new. He can’t go and buy a franchisee public toilet or subway or something. That’s, that’s not going to happen. So we are rebranding these cafes to one of our brands or depending on the brand at the cafe all at once we rebrand that cafe, something very similar to a red doors like red rose, go to an existing hotel, rebrand it to a red dot hotel and start selling it. So we have now rebranded these cafes, there are 300 1000s of small cafes, Indonesian, right and like the market opportunity is huge. So we have the technology, we have the food, he rebranded Cafe into a good fit cafe. Now this cafe is a branded cafe, this cafe gets amazing food, he doesn’t have to hire a head chef invest in menu, r&d, etc. He could he could lower down his operating expenses, he gets the tech which automates all of the back of the house operations. And he gets to become like the branded in a branded cafe. He stands out from the nearby competition. And so that is something that we’re working on. It’s so
Michael Waitze 56:03
Rish, I want to let you go because we’ve been at this for an hour. And the next topic that I’m going to raise could keep us for another hour, I want you to think about this. And I want you to come back in six months and tell me I’m wrong. If there are 300,000 calves because I don’t want to go through this now, but I just want to introduce this as a topic and see what you think. If there are 300,000 cafes, this is your offline to online business connectivity, if you’re providing them the technology for the food part of it. Now you can also provide them technology for other things like finance, insurance, savings, all these other fine all these other products you can offer to them that nobody else has to see but that they will definitely pay for because it’ll make their operations. Pick a number five times seven times more efficient. So it’s more than just a food business. I want to leave you with that. I really want to thank you Rishabh Singhi for coming and doing this today. Your flexibility, your openness and just sharing of this story has been incredible. The founder and CEO of DishServe. I really appreciate it. Thank you so much for doing this today.
Rishabh Singhi 57:04
Thank you, Michael, thanks a lot for your time.