The importance of funding for the growth of food and grocery businesses

Vroots is an e-commerce platform for food and grocery products that supplies and delivers products to customers.

Over the last year of operation, customer orders have reached 115, but after two and a half years of trying to continue and making many changes to the business model, the decision was made to shut down, despite achieving the best product form.

Challenges and issues that led to the closure of the company:
Lack of fund

Anyone who tries to enter the online food and beverage industry knows very well that it requires a large amount of funding, especially in marketing, in order to obtain even a small percentage of this huge market. Unfortunately, this is the only way to compete with the e-commerce giants in this field, whose expenses exceed by many multiples what is typically required from investors or investment funds.

The founder tried to communicate with almost all investors in Egypt and the Arab region, and the response was always that you will not be able to compete with the large companies present in the market.

The concept of investing in startups in Egypt is the worst of its kind. If the product is not sexy enough for the investor or if you do not have sufficient connections and network, some investors may not consider investing. Additionally, some investors may ask for a large percentage of ownership, such as 50%, in exchange for their investment. If your product does not meet these criteria, it may be difficult to secure investment.

Although the idea is beneficial and offers a solution to a big problem for customers, converting the product from offline to online presents difficulties in achieving profitability for the following reasons:

  • After some unit economics calculations, profitability will not be achieved until a massive volume of orders is reached to ensure that profit margin is higher than the required costs.
  • The nature of the product itself requires specific and sensitive handling to avoid wastage of goods and money.
  • The average demand is not profitable if the focus is only on vegetables and fruits, so investment in other side products is needed, and this also requires funding.
  • An abnormal number of competitors appear every day in this field.
  • There are many alternatives for the customer to obtain the product.
  • Online culture and the behavior of housewives in dealing with smartphones are still difficult.

Vroots
Industry: Food and Beverage
Business Model: E-commerce
Date: Sep 2018 – May 2021
Company Status: Closed
No. employees: 1-10
Country: Egypt
Abdalrahman Shata
“Co-founder and CEO”
3 years of experience in operations and commerce.
He also founded a startup called ‘Khirat’ that provided fresh products directly to end consumers, which was later acquired before starting Vroots.
Lessons learned:

  1. The success of companies lies in having a strong team, not just in having a good idea and funding. A good team can develop any idea.

  2. A successful founding team does not necessarily have to be highly skilled and working at Google or Amazon. Technological expertise is not the only reason a company grows. Companies grow with a commitment to time, resources, work volume, and responsibility. Therefore, it is easy to share a technically skilled person, but it is difficult to partner with a responsible and committed person.

  3. A founding partner is not just someone who is present to complete the missing piece of building the company. The real role of a partner is to provide emotional support during the journey in moments where you find yourself at the bottom and unable to continue, and they help you overcome that stage. The opposite is also true.

  4. It is possible for the customer to be satisfied with the service, but you may not be able to collect any money from them. Therefore, the solution your company offers must serve and solve the customer's problem, but it must also be financially rewarding to collect money because it is not a service provided by a charity organization.

  5. The solution your company offers does not necessarily have to be highly creative and innovative, but it simply works to solve the recurring customer problem while at the same time there is an opportunity to collect a large amount of money from the customer and work to achieve unit economics profitability after applying the necessary calculations.

  6. The product or service you offer must be attractive enough to make investors seek you out, and even seek to know your non-material needs and work to implement them and be interested in joining your company.

  7. Technology is a way to improve the cost system for companies, or a tool to accelerate and facilitate the process of expansion and growth, but it is not the solution provided to the customer. The customer needs a product or service that solves their problem, not just an application or website.

  8. Do not make sacrifices that make you neglect your health and forget your family and friends just because you are enthusiastic and ambitious and see your company worth a billion dollars after five years. You won't feel happy when you finally achieve that goal alone and realize that you're at the beginning of a journey to treat your psychological issues.

  9. Start-up companies are not short-term goals, meaning that you may not be able to get money after a year or two. Even your salary may not exist in the beginning. Therefore, if your goal is profit and making money, you can start a simple traditional business or what is called a small or medium-sized project, such as a clothing store or grocery store, and there is no shame in that.

  10. Do not expect that employees have the same level of concern for the company as you do. These high expectations are what ultimately harm the company. If an employee does not receive their salary at the end of the month, they will leave the job and look for another one, and they will not care about the dream or value provided by the company.

  11. The company's responsibility is not easy, responsibility towards your commitment to your partner, time, appointments, and promises with others and suppliers. If you are unable to bear responsibility or lead a team, do not start a company and harm others with you.

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