PepperT(r)ap- Failure, Fallacies of founders and investors

Ever since news broke about the winding up of PepperTap operations, I been having a gut wrenching feeling, who is responsible for this, the resulting spillover. I didn’t see many investors/startup folks express their views of this. I can see it as one of the best executed PR cover-ups, to what would/could have been great learning from mistakes of the founders and investor alike. So here is my take.

Reverse Logistics — Nuvo-Ex — PepperTap — Funding — Shutdown — Nuvo-Ex-Forward

Till November 2014,the founders of PepperTap, ran Nuvo-Ex which was into reverse logistics, which was one of the biggest challenges for e-commerce players then and now. This is approximately when the US based Instacart was making waves in the silicion valley have been accepted into y-combinator after the deadline by delivering a keg of beers, earning the moniker of Uber for grocery with billion dollar valuation and unicorn tag in no time. I knew its was just a matter a weeks before the copycats and replicas started appearing on the Indian startup scene, but was surprised with pace at which this happened, Peppertap and Grofers emerged as the brightest copycats, with Deliver from bangalore missing out on the funding frenzy. Deliver to its credit was working on the hyperlocal delivery idea for nearly 2 years, before the word ‘hyperlocal’ burst on the startup scene. Deliver to me was the first clear offline-to-online hyperlocal delivery player, who was ahead of time and could not get any substantial funding( Basically no such thing had happened in the US, investors wait for copycats and replicas for validation, bold new ideas are typically thrown out by the investors here). Eventually Deliver got folded into BigBasket, for good.

Coming back to pepperTap, which apparently raised a seed round from Sequoia Capital even without a brand name ‘PepperTap’ just based on the idea, which is brilliant considering rarely ideas get funded in India, especially if its coming from sequoia.

Typically startups are expected to prove product-market fit and unit economics numbers in a single market before scaling up. And investors are expected to make sure these numbers are in place before handing out growth money to scale in the next rounds. In the case of PepperTap and lot of other startups have lapped money just to expand a unscalable, unviable model to multiple cities, 31 cities in case of PepperTap.

The only question that remains to be asked who is responsible for this ugly shutdown? Pour money, expand and shut down.

Its clearly, the twinkle eyed founders and the more so myopic investors who are at fault for posssibly the biggest startup failure in recent memory. I just wonder burning through $40 million and then turn back, tell the investors and everyone, this is not working, I figured out now unit economics is not working, we need funding for eternity to make this successful, so we are going back to our old business — reverse logistics to take it forward:- ).

Founders and investors are equally guilty for the PepperTap shutdown, the biggest learning- founders should learn to admit mistakes early and not till you burn through $40 million dollars. Investors should also invest in bold new ideas, considering they are risk investors, ensure unviable, unscalable startups are not funded, less pain for everyone involved in the startup ecosystem.

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