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This week’s hostage crisis at a firm called TinyOwl has dragged it and other food startups in India into the spotlight. The co-founder of TinyOwl, Gaurav Choudhary, was allegedly held against his will for two days by some members of staff angry at being suddenly laid off, reports The Times of India.

The incident comes in the wake of layoffs at Zomato, Dazo shutting shop, and Foodpanda being accused of faking it.

Are India’s food startups going sour? Not quite. Amid hyper growth, inadequate revenues and high investor expectations, individual performers in the sector are simply hitting speed bumps on a narrow road, say industry insiders.

Inexperienced

Take Mumbai-based TinyOwl, for instance. Charges of reckless spending, layoffs, and non-payment of salaries have flown thick and fast against it in the past week as the company tries to restructure.

“It’s a case of young, inexperienced founders who did not know how to manage growth amid high investor expectation,” an industry insider to explained to Tech in Asia.

The TinyOwl hostage situation occurred amid layoffs at the company’s Pune office. 24-year-old Gaurav emerged from the building Thursday evening.

An employee was quoted as saying by MediaNama, “They’ve splurged recklessly and vendor payments are pending. They’re least concerned that we’re jobless and it’s Diwali.”

At this year’s IPL cricket tournament, TinyOwl had partnered with the Mumbai Indians team as part of a marketing campaign. TinyOwl is up against a number of similar app-based food delivery services.

The startup earlier this week announced US$7.67 million in fresh funding. In February, the company revealed plans to expand rapidly to over 50 cities across India.

Reality check

But then came the bitter pill.

TinyOwl laid off 160 people two months ago and then over 100 people in October, according to MediaNama. It is shutting down in four cities and plans to operate only in Mumbai and Bangalore, leading to the stand-off drama that eventually ended Thursday.

“We’ve been able to resolve this and have immediately started working on considering the demands beyond the terms of employment, placed forward by other employees from other cities,” Harshvardhan Mandad, co-founder and CEO, said in a statement.

On the long road to success, lessons are being learnt the hard way.

“Pruning is needed to cut costs and manage revenues, but they handled the winding down badly,” an industry insider said on condition of anonymity.

Despite strong growth over the past year, Zomato too has seen layoffs.

CEO Deepinder Goyal shot off an email to the entire staff: “The hard reality of this growth is that our revenue hasn't kept up with the growth in our sales team.”

Industry insiders see this as a company-specific problem. “Zomato had over-hired, too much money was devoted to global expansion, so costs went up,” an expert explained.

That’s not very different from what Shashaank Singhal, chief executive of Dazo, a Bangalore-based startup that is winding up operations less than a year after inception, has to say. “We don’t feel there’s any bubble that’s waiting to burst,” he told the Business Standard.

In the case of Rocket Internet’s Foodpanda, corporate governance and leadership issues seem to be at the heart of its troubles.

The newspaper Mint was scathing in its report. “This is also the story of a startup where the culture seems to be: screw processes, screw ethics, and screw the company, too; let’s just have a party,” it said.

The big picture

According to Tracxn, a company that provides data on startups, about INR 4.67 billion (US$71 million) was invested in the sector in 2015, with Zomato alone receiving INR 3.2 billion (US$50 million).

There are plenty that are making their way to the hearts of customers – through the stomach.

Twyst, which lures customers to restaurants with attractive offers through its Android and iOS apps, is one such startup. With more than 1,000 restaurants on its service in Delhi and surrounding cities like Gurgaon, it has been judicious about marketing.

Rahul Chakraborti, co-founder and COO at Twyst, told Tech In Asia, “For us, customer acquisition has been a joint effort with restaurants. We have consciously avoided brand advertising and have a very lean team, all of which helps cut costs.”

Twigly is another. The restaurant-in-the-cloud secured seed funding worth US$200,000 this week.

So is the tech-based food industry under threat? For now, it looks more like a case of indigestion.

This post Keep korma and curry on: hostage drama at TinyOwl as India’s food startups stumble appeared first on Tech in Asia.

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