Faasos Food Set to raise Rs 120 crore

MUMBAI: Faasos Food Services, a technology-focused quick-service restaurant chain backed by Sequoia Capital, is raising $20 million (Rs120 crore) in a fresh round of funding led by Lightbox Ventures.

This is the highest fund-raising by a homegrown QSR chain and is likely to give a shot in the arm for local startup eateries that have lately seen investor interest wane. The fundraising comprises a $16 million equity investment by Lightbox and Sequoia, and a $4 million debt.

Pune-based Faasos, which hawks wraps and biryanis from 90 outlets across six cities, will use the funds to add 10 cities over the next 12 months. It expects to cross Rs100 crore in revenue by March 2016. “We expect to break even by March 2018 on revenues of Rs 450 crore,” Jaydeep Barman, founder and CEO of Faasos, told ET.

Much of this growth, said Barman, will come on the back of extensive investments that the company has made in technology and data analytics in the past couple of years. "Anything that is habit-forming is more susceptible to technological disruption," said Barman, a former McKinsey and Co executive who founded Faasos in 2004 with Indian Institute of Management-Lucknow batchmate Kallol Banerjee.

Investors are betting on Faasos’ ability to leverage technology, both on the backend and frontend, to emerge as a leader in the domestic QSR market.

"Just as Flipkart was able to become the largest retailer in India over the last 5-6 years, we think Faasos can do the same in the food business," said Prashant Mehta, partner at Lightbox Ventures.

At the core of this technology is Faasos’ mobile app that was launched in March last year. The company claims that 65% of its orders now come through the Internet and it processes 50,000 orders a month through its mobile app. “Jaydeep (Barman) started investing in mobile and data analytics 12-18 months ago to build a path to non-linear growth,” said GV Ravishankar, managing director of Sequoia Capital, which has so far invested nearly $10 million in the company.

Faaosos is part of a growing tribe of homegrown QSR chains that are trying to replicate the McDonald’s or Domino’s Pizza models with Indian fast food. Apart from Faasos, several others, including Box8, Goli Vada Pav and Hello Curry are in the market to raise fresh funding.

“We are in close discussions with several investors but have not yet signed a termsheet. We expect to close the second round of funding soon,” said Raju Bhupathi, founder and CEO of Hyderabad-based Hello Curry. The company, which raised a reported $500,000 in seed-funding from Sri Capital last March, is raising another $10 million. Hello Curry offers Indian food out of four outlets in Hyderabad and is in the process of setting up two outlets in Bengaluru. It derives 20-30% of its orders through the Internet and will soon launch a mobile app.

Indian Angel Network-backed Box8, earlier known as Poncho, has raised Rs14 crore from Mayfield India Fund, according to filings with the Ministry of Corporate Affairs (MCA). However, the Mumbai-based company’s co-founder Amit Raj said that no such transaction has been completed yet. Box8 has 20 outlets and plans to grow to 35 outlets in Mumbai alone, and expand into Bengaluru and Pune by the end of the year. The company, which gets around 2,000 orders a day, expects 65-70% of its orders to come from the Internet in the future.