Food delivery #startup Dahmakan is on the cusp of closing more than US$2 million in follow-on funding after its US$1.3 million seed round back in February, the company has told Tech in Asia. One of the investors is famed startup accelerator Y Combinator (YC), which has just accepted Dahmakan into its latest cohort. Dahmakan is the first startup from Malaysia to enter the program.
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Unlike rival services such as Foodpanda, UberEats, and Deliveroo – which act as middlemen who pick up food from restaurants and stalls and deliver them to customers – Dahmakan delivers meals that have been prepared in-house in its own kitchens. The company currently makes tens of thousands of deliveries in Kuala Lumpur each month, and expects to begin turning a profit within the next nine months.
Rather than trying to create another marketplace, Dahmakan’s founders wanted to take control of the entire value chain, including food production and logistics.
Co-founder and CEO Jonathan Weins previously worked for Foodpanda and oversaw its rollout in Hong Kong. He tells Tech in Asia that some of the initial ideas that eventually led to Dahmakan’s formation were a result of identifying inefficiencies in the model deployed by Foodpanda and other “middleman” services. Rather than trying to create another marketplace, Dahmakan’s founders wanted to take control of the entire value chain, including food production and logistics, so they could build a more efficient delivery service.
“The customer orders food through the marketplace model from restaurants that might not be optimized for delivery,” Weins suggests. This not only affects food quality, but also value, since such customers will often be paying dine-in prices to order from establishments that are geared more towards sit-down meals rather than takeouts.
“In a restaurant like that you’re paying for good service, branding, atmosphere, music, air con, and so on, in addition to the food,” he says. “Then [to get it delivered] you’re paying a hefty delivery fee and service fee as well.”
It is not just customers who can end up paying over the odds. The marketplace model essentially boils down to distributing orders across kitchens at many different establishments. Again, these kitchens will often be on the small side, designed primarily to serve dine-in customers, and equipped to produce a certain number of meals each sitting.
Dahmakan turns this concept on its head by centralizing all orders and producing them in one kitchen, so the focus can be on the delivery aspect. “We save tremendously on labor costs, and work with bulk processes – instead of cooking several small pots, we can make one huge pot – and that also means we get much better purchasing prices from suppliers,” says Weins. “That obviously gives us much more bargaining power than a small restaurant that serves a few hundred.”
Technology has a significant role to play in this model. Dahmakan’s in-house development team has built a routing algorithm in order to find the most efficient routes for its drivers. This takes things like past trips into account in order to decide which driver should take which delivery round. A forecasting tool – another in-house creation – uses machine learning to help the company predict demand on particular days. This allows it become more efficient and keep average food waste below a target of 5 percent.
This allows Dahmakan to provide its customers with free delivery – even without minimum order restrictions. Weins says the secret sauce is in the startup’s logistics technology, which took the team two years to develop. He claims it allows them to do 10 times as many deliveries per hour than existing food delivery marketplaces. “In this way, delivery cost becomes minimal and we can absorb the remaining costs instead of forcing customers to pay delivery fees,” he explains.
Dahmakan will primarily be focused on building up its presence in Kuala Lumpur for the rest of this year, though it is eyeing Bangkok, Hong Kong, Jakarta, and Singapore for potential next moves. Co-founder and COO Jessica Li says a soft launch in a second market is slated for sometime during the final quarter of this year. The funding it secured will mainly be used to hire technology and marketing talent.
Across the region, it will face competition not only from the delivery marketplaces, but also from startups like BerryKitchen, Grain, and Amazin Graze which pursue similar centralized kitchen models. Weins thinks that his team’s industry experience is what sets it apart from these rivals. “We know what we needed to focus on from day one, which was to build around our technology.”
Dahmakan enters YC at the same time as Payfazz, the first Indonesian-founded startup to join the program. The accelerator’s president Sam Altman recently spoke on YC’s increased interest in Asia and hinted at the opening of a regional chapter.