If you need honest answers to critical questions like how do you bootstrap a food delivery company to operational breakeven in a market like Dhaka or how not to solve fake problems in the name of entrepreneurship, probably Ahmad AD is one of the few people in Dhaka you should meet for interesting insights.
For those who don’t know Ahmad AD, he is the co-founder and CEO of HungryNaki, country’s first and leading online food ordering and delivery company.
Over the past years, he and his team at HungryNaki have built a wonderful bootstrapped company from scratch which continues to experience meaningful growth every month. And things are about to change for HungryNaki - the company just secured its first investment.
Building a sustainable business with limited resources is a lot of thinking job. Conventional wisdom would not take you far. Moreover, competition has intensified in food delivery space, where HungryNaki operates, over the past one year. And many of these competitors have deep pockets which make Mr. Ahmad’s job doubly difficult. However, he does not seem to be worried about competition and has his own thesis of looking at the food delivery business in Dhaka.
In this fascinating interview, we discuss HugnryNaki and its business, its strategies and ambition going forward, the state of competition in the food delivery space, imperatives for food delivery business and food delivery market in Dhaka, and contemplate on his lessons from his entrepreneurial journey and his insights into building a company.
Future Startup
Thank you for agreeing to do this interview with us. First off, please tell us about your background and then your journey to what you are doing today.
Ahmad AD
I graduated in 2007 from AIUB, where I studied EEE. My major was in Industrial Robotics. I was pretty active as a student. I was the president of IEEE of its AIUB branch. At that time I was also the national committee vice president of AIESEC Bangladesh.
Right after the graduation, I joined a textile company where I worked for around 7 years before starting HungryNaki.
As you know, we started Hungrynaki in 2013. I met Tausif through a mutual friend, Shourav Islam, CEO of UNIFOX Digital. Sajid, one of my friends, and I were planning on starting something at that time. We had been thinking about retail and fashion. Tausif had worked in e-commerce for quite a while and he knew the business. And I have been a technologically inclined person since my childhood. I was also into these tiny businesses, selling small things, here and there since my school days.
So the business bug was always there in me. I was working at a textile company as a full-time business head. Though the position was not of a CEO, I was a director there, but my responsibilities was that of a CEO. Major technological changes were happening at that time even in the garment sector. I saw that there is a good potential for technology and related business.
In textile, I noticed that a tough time was coming for Bangladesh. The world is moving towards automation. If our local companies don’t embrace automation or improve their excellence to an extent where they could not be replaced, even survival would be a challenging affair.
In my textile company, I pushed for adaptation of technology as fast as possible. Make your people efficient so they can beat machines. If they can't beat machines, make sure that machines cannot beat their excellence.
Long story short, before Hungrynaki, we used to have these common discussions in the evening after office about starting a business. We were exploring different opportunities. We had to eat during that time. We would send our drivers to fetch food and so on. That’s when the idea came that there are many people who also need this service.
At that time, the way this problem was solved around the world was creating a platform for the restaurants and connecting restaurants and customers. Restaurants would do the delivery. Tech companies were merely providing the platform.
But it occurred to us that in Bangladesh it would not be possible to do so because most of the restaurants in Dhaka don’t have their logistics. So we would need to have our own logistics.
We made the decision in June and started the company in July. Tausif joined here after we started. Then we recruited two business developers and three web developers. You know rest of the story!
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we are not a food delivery company. We are not in the delivery business, we are in the food business. It is not simply delivering the food but about selling the food. The dynamics of the food business and the dynamics of delivery business are very different.
Future Startup
Please give us an overview of Hungrynaki, in terms of the size of your operation and business.
Ahmad AD
The business is growing every month around 7 to 10%. We are a bootstrapping company. Naturally, we could not invest heavily in growth for the sake of growth. Instead of pouring money into mere advertising and marketing, we have been focusing on service quality and giving our customers a better experience.
For instance, we take complaints from customers very seriously. We listen to our customers carefully and immediately resolve the problems. This has been a priority area for us. Consequently, our overall number of complaints has gone down and continues to decrease every day.
We are a team of 50 people in the core team. We have a team of 180 delivery people working full time with us and some 30/40 part-timers who join us when there is a need.
The other area that we pay a lot of attention is ensuring a good working environment for our delivery people. Delivery is a strenuous job. If you take traffic and other conditions in Dhaka into consideration, it is a very difficult job.
When people are working on the road, you need to give them a proper resting area so that they can take a break. We have made such arrangements. This ensures that they can work properly.
We usually get asked why we’re not adopting the freelance model for delivery. It is a safe-model I admit, but we believe that it's important for us to work closely with our delivery people because they play an important role in ensuring our customer experience. Due to this, our turn out rate of delivery men is less than 5%. Even some of our earlier delivery men are still with us. The upside for us is that it allows us to offer better service to our customers. Ou delivery people work harder and take ownership when they do so.
We have around 8 hubs in Dhaka. We have gradually increased this number from 4 to 8 since 2017. We have offices in Chittagong, Sylhet, and Narayangonj.
We expanded to Narayanganj not long ago. The response has been tremendous. The people are very receptive and tech-savvy.
The number of restaurants on our platform has gone up as well. From 750 restaurants, we now have close to 1000 restaurants. One can dramatically increase the number of restaurants but then and again, there are many factors that you have to keep in mind while doing so such as whether all the restaurants are active and serving.
Future Startup
You mentioned, you have 8 hubs in Dhaka now? How does that work? What’s the strategy behind having hubs?
Ahmad AD
The hubs work more like control areas. Food delivery is a hyperlocal business. Efficiency depends on how quickly you can deliver foods to your customers. You can reduce this lead time if you can deliver within the local area.
The distance between a customer and the restaurant also dictates the cost of delivery. So it makes sense to have a hyperlocal operation.
The business is growing every month around 7 to 10%. We are a bootstrap company. Naturally, we can’t invest heavily in growth for the sake of growth. Instead of pouring money into mere advertising and marketing, we have been focusing on service quality and giving our customers a better experience.
Future Startup
How is your operation in Chittagong and Sylhet doing?
Ahmad AD
Chittagong has been picking up well. We now have a team of around 18 people in Chittagong. Sylhet team is relatively smaller where we have around 12 people.
Compared to when we started in these two cities, the business has grown meaningfully. Both cities show a good potential.
Future Startup
You have almost doubled the number of daily orders compared to last year, what are a couple of things you are doing to push the growth?
Ahmad AD
Almost everything that happens at HungryNaki is data-driven. When it comes to advertising, we are mostly into remarketing. We do precisely targeted promotions.
We have got our own data science team. They are relentlessly working on understanding our customers better, their behavior, finding a pattern and designing incentive mechanisms for our customers. Then we use that insight to communicate with our customers. This allows us to be effective and efficient with our communication.
Other than that, as I mentioned earlier, we are an extremely customer-centric company. Customer service is one of our key strength. When you serve your customers well, business follows.
Future Startup
You take commissions from restaurants on orders served through your platform, have there been any change to that model? Do you plan to explore any other option? There are a few companies trying subscription model in this space.
Ahmad AD
No changes. We take commissions from restaurants and the delivery fees. We have reduced the delivery fee to tk. 45 which is the lowest in the market. We are planning on reducing it further as our number of orders goes up.
As a team, we are super efficient. Our team is multitaskers. One person does the work of three sometimes. We invest a lot in thinking.
We don't see the fund in dollars. We see it in poisha which helps us to be judicious when it comes to investing and spending and push us to be efficient. If our orders grow by 10 times, our existing infrastructure would be able to deal it without any major change.
Almost everything that happens at HungryNaki is data-driven. When it comes to advertising, we are mostly into remarketing. We do precisely targeted promotions.
Future Startup
Have you raised any investment?
Ahmad AD
We have secured our first fund recently. I can’t give you the details now. We will disclose the details soon.
Future Startup
You have been working on a lot of automation. Last time your COO Tausif Ahmad told us that automation is a priority for you in order to bring efficiency and improve customer experience. What are you doing there now?
Ahmad AD
We are using AI in our operations. As I mentioned earlier, we are a data-driven company. We are using tools and techniques around machine learning and deep learning to improve our operational efficiency.
Future Startup
What percent of your payments are made digitally? When we spoke last time it was about 20%.
Ahmad AD
It has gone down since. It is now about 3% from mobile wallets and 5% from credit cards. It has fallen drastically in the recent times. People are more comfortable with paying on cash.
Almost everything that happens at HungryNaki is data-driven. When it comes to advertising, we are mostly into remarketing. We do precisely targeted promotions.
Future Startup
Do you plan to go deeper into food vertical?
Ahmad AD
We plan to venture into the home kitchen market by this year which should enable us to deliver homemade food.
We have made good progress and currently working on making proper guidelines and models. Hopefully, you will see something concrete pretty soon.
Future Startup
Who are your customers?
Ahmad AD
The dominant age group is 27 to 35. Our customer group has aged a bit last one year compared to before. Initially, it was mostly early and mid-twenties. Over the time, it has changed. It is now mostly mid-twenties to mid-thirties dominate.
One of our key strength has been our loyal customer base. About 70% of our customers return to us.
Future Startup
That’s a very good retention number and retention is the core of sustainable growth. How do you ensure that people come back to you?
Ahmad AD
Service is the key. Make sure you deliver on your promise and a great experience for your customers. We simply take care of these things.
We ensure timely delivery. If any problem with the food arises, we solve it immediately. Same goes for any problems we face. We track through our apps but mistakes happen. We try as best as we can.
We have around 8 hubs in Dhaka. We gradually have increased the number from 4 to 8 now since 2017. We have offices in Chittagong, Sylhet, and Narayangonj. We expanded to Narayanganj not long ago and we have found the people very receptive and tech-savvy. The number of restaurants on our platform has gone up as well. From 750 restaurants, we now have close to 1000 restaurants.
Future Startup
What is order ratio from mobile and web?
Ahmad AD
65% of our orders come from the mobile app and mobile web and 35% from the web.
Future Startup
How do you differentiate yourself from the market? As the competition grows, standing out will become even more important?
Ahmad AD
Everyone asks what is so special about Hungrynaki, I will give a common answer: it is all our customer. Our customers are everything for us.
We love them and they support. Our main strength is our loyal customers. That’s where our focus has been and will remain in the future.
Future Startup
In terms of food delivery market, there are a couple of players. You have the ride-hailing companies offering a similar service. How big is the market in terms of daily number of orders?
Ahmad AD
It is hard to get accurate data. From the movements, my take, this is a guesswork of course, is about 4000 - 5000 orders per day.
Future Startup
Competition is intensifying in the space. A host of new players has entered the space. Ride-hailing companies are entering the space. How do you think about competition?
Ahmad AD
Competition has grown over the last one year. It will intensify as the market grows. Some of the players in the space have deep pockets which enable them to spend freely. However, deep pocket is part of it, not the entire game.
For us, it is different. We have been in this market for five years now. When you spend dedicated time with something, you learn. We have the learning and market knowledge.
We understand the market. We believe we are rightly positioned to better serve our customers. And it has been proven given the fact that we have been able to build a loyal customer base.
The other thing is, we are not a food delivery company. We are not in the delivery business, we are in the food business. It is not simply delivering the food but about selling the food. The dynamics of the food business and the dynamics of delivery business are very different.
Many people consider that convenience is an important service in Dhaka and food delivery fits into that category. But what we have found out is that if you take convenience alone, the addressable market size is very small. It is hard to get past a certain size. There are deeper problems here and our goal is to solve those problems.
Solve a problem that really matters. When you start with a superficial problem, it gets really very hard to build a real business which is increasingly the case in tech space these days. We see many technology companies trying to solve a problem that doesn't need solving.
Future Startup
What are some of the biggest lessons from your journey so far?
Ahmad AD
I always say that build business rather than valuation. That is where people need to focus. You should build a sustainable and good business so that you don't need a huge amount of money to survive. You need that money to expand and scale.
Burning vigorously. Valuation for the sake of valuation is not something that one should aim for.
We have learned a lot over the past few years. We learned how to spend properly which I think is one of the most important things about building an early stage bootstrapped company. That’s one area I would say founders should pay attention.
Future Startup
A couple of pieces of advice you would like to give to early-stage founders.
Ahmad AD
Solve a problem that really matters. When you start with a superficial problem, it gets really very hard to build a real business which is increasingly the case in tech space these days. We see many technology companies trying to solve a problem that doesn't need solving.
Build a sustainable business. Get your business model right. Sustenance is the key. Don't go and burn yourself for wrong reasons.
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Interview by Ruhul Kader, Transcription by Shabiba Benta Habib
Cover photo credit: Hults Prize here
