7 Reasons why Doodhwala Failed

Introduction – Doodhwala is an Indian startup that was started in 2015 by co-founders Ebrahim Akbari & Aakash Agarwal. It was headquartered in Bangalore, India.

It had everything for success such as funding, a huge vision, 2 young entrepreneurs as co-founders and a growing market in India for their products and services. Despite all these things, they failed miserably and shut down their operations.

A startup shutting down even after receiving funding isn’t new but what makes this case interesting is that the founders were charged with fraud and FIRs were filed against them. Many employees and vendors have alleged that the company didn’t pay them in months.

While the startup had shut down, their founders say that they have closed their operations due to unfavourable circumstances and have transferred the rights of remaining customers to FreshToHome.

This one would be a very interesting story to cover as they failed after just 4 years of starting their operations. Read along to know about the possible reasons for the failure of this startup and if you’re an aspiring entrepreneur make a note of all the points as you can certainly avoid these when you’ll start your own startup.

 

Early Days – Doodhwala was started in 2015 with a vision to bring fresh farm milk directly to customers. After Bangalore, they expanded into 2 more cities – Hyderabad and Pune. The startup delivered milk, fresh dairy products, groceries, fruits and other fresh daily essentials directly to your doorstep.

Both of the co-founders started the operations and scaled a 5 member team to a 400 member team in just 3 years, making Doodhwala India’s largest subscription based e-grocer. The company started when one late night in 2014, both were working on business projects while munching on cereal with milk.

But they soon realized that they were out of milk and this left them wondered how life would have been easier if there had been an app for ordering milk to their doorstep. At that very moment, they realized that this idea had huge potential.

Next morning they went out to see how the milk supply market actually worked. This was followed by weeks of research and surveys. Finally they launched a beta version to test the market. They were amazed at the response they received by the users. A lot of consumers liked their idea of hassle-free home delivery of milk.

Finally their startup was launched with the official name of Doodhwala and had a tagline of “India’s Largest Fresh Milk Delivery App”. They used to complete their orders before 7am daily. They used to delivered more than 30,000 litres of milk each day before, out of which 60% was in Bangalore alone.

According to co-founder Ebrahim Akbari, “Consumers were looking for better ways to find good quality unadulterated farm milk. In a nutshell, they wanted a punctual, cost-effective and a non-traditional option for milk and other dairy products”.

 

Marketing Strategy – They often marketed themselves as a one stop solution to have fresh unadulterated milk and various other dairy products at your doorstep.

 

Funding – Doodhwala raised a total of $2.4 million in funding over 2 rounds. Their latest funding round was held on February 23, 2018. It was funded by 2 investors only. The 2 investors were as follows:-

• Tom Varkey – $150,000
• Omnivore – $2.2 million

 

Controversies – Now we are finally going to talk about what went wrong with Doodhwala. When I researched about the story of this startup, I came across multiple reasons why they failed. If there was just 1 reason, they could have saved themselves from failing but they went down like the titanic.

The 7 reasons were as follows:-

1. They were burning Too Much Cash,
2. They were operating on Low Margins,
3. The Acquisition Cost of a customer was too high,
4. Use of Excessive Discounts and Cashbacks,
5. There was no clear competitive advantage or differentiating factor,
6. They faced a lot of competition from other startups like Ninjacart and also from big companies like Big Basket and Grofers &
7. They didn’t receive a fresh round of funding from their investors. This might had saved them from stopping their operations.

 

You can take any reason and consider it to understand why this startup failed but the sad story is that they might never resume their operations in the future. According to a vendor, they owe Rs 6-7 crores to around 30-35 vendors in total.

According to the vendors, both of the co-founders are absconding and their phones are continuously switched off. Unable to get their money, some vendors stopped supplying products to the company in September 2019 due to unpaid dues.

Radha Krishna, who was the marketing head for Doodhwala, had documented a protest against the founders. This case filed on October 22, 2019 was over unpaid pay from July-September, 2019. He asserted that they owed Rs 2.88 lakh to him.

He also said that, around 60-70 employees have not been paid. An employee, who wished to remain anonymous, says that despite several follow-ups, he is yet to receive his salaries and is owed over Rs 3 lakh.

One vendor Manjunatha K, who owns a company called Adern Creamery Pvt Ltd, supplied milk to the startup. In his complaint, he said that the founders have not paid him his dues for the milk he supplied between June 1 to September 12, which amounts to Rs 17,42,000. As per his complaint, on September 15, Doodhwala gave him a check of Rs 9.6 lakh, which bounced.

Rahul Partners, managing partner at Lokal Buzz Events and Promotions, told that the company had done some promotional activities for Doodhwala, for which it had submitted 8 to 9 invoices, out of which 4 are pending. Doodhwala owes Lokal Buzz Rs 1.38 lakh, which it hasn’t paid for the last 6 months.

And it’s not just employees or vendors, a look at the social media pages of Doodhwala shows several disgruntled customers who haven’t received orders and refunds. Several users also complained of their money getting stuck in Doodhwala’s wallet after it handed over operations to Freshtohome.

 

Conclusions – To sum it up, something really went wrong with Doodhwala and we just don’t know what exactly happened with them. Although we know that there are several reasons why they failed (Listed Above).

If you’re an aspiring entrepreneur who read till here, then thanks for reading and please note all the mistakes that they did so that when you start your own startup, you can avoid them. We wish all the best for our future Entrepreneurs.