UK start-up HalalEat successor Pronto Eat dissolves after difficulties

LONDON - Pronto Eat, which developed out of the UK’s first halal food delivery service HalalEat, has officially ceased operations even before the mobile app hit the market.

The company, which was incorporated in April 2018, filed an application to be struck off the companies register on January 2, according to a record on UK’s Companies House, after it suspended operations in November. The company then circulated a closure statement from co-founders Musa Ahmed and Abul Rob.

In an exclusive interview with Salaam Gateway, Rob points to Brexit as one of the key reasons for investor uncertainty.

“2019 was a challenging year for us,” Rob told Salaam Gateway.

“Investors wanted to take a wait-and-see approach. There was a fear that Brexit might lead to a UK tail-spin recession.”

Pronto Eat emerged as a result of the acquisition of then three-year-old HalalEat in 2018 by sole investor Mian Ali. Rob told Salaam Gateway at the time that the new venture would become a “more complete proposition” that would include expanding and scaling up of the core business of food delivery, its own-brand ready-to-eat meals, and a user-led consumer blog focused on halal food eateries.

Today, the entrepreneur concedes that investors were unwilling to provide much-needed capital for the start-up to finish developing the Pronto Eat app. Apart from co-founders Rob and Ahmed and main investor Ali, Pronto Eat’s shareholders as registered with Companies House in January 2019 included individuals Sakina Syed, Nomaan Baig, Ali Hassan Syed, Mohammed Mokoddus, and Thoai Nguyen.

“You can’t accelerate and decelerate at the same time,” Rob said about investing in a start-up such as Pronto Eat.

He stressed that key performance indicators for food tech apps mean that investors have tended to wait up to 10 years or longer to reap the benefits, citing the example of Just Eat that started in 2001 and went public in 2014.

“You can produce solid numbers but that doesn’t mean your business is profitable,” said Rob.

“In conversations, the investors liked the product and there were positive signals but that didn’t translate into significant investment,” he lamented.

Pronto Eat had also approached restaurant partners in its search for capital but their words didn’t match their actions, according to Rob.

“They were willing to invest but what they offered wasn’t acceptable to us or they wanted an equity stake in the business,” he said.

In addition to lukewarm reception from investors, Pronto Eat also resorted to other sources of financing, but even this did not help the business stay afloat.

“It gets to the point when you’re asking other people for money through WhatsApp and we personally drew down our personal credit cards and exhausted corporate financing from financial institutions. We tried everything,” said Rob.

He said he continued to fund some of Pronto Eat’s financial obligations out-of-pocket.  

“I stepped away from the business in July 2019 and got a job and used the salary from that to pay for the business between July-November 2019,” he said.

Certain market conditions also made it difficult for Pronto Eat to operate and be profitable.

Particularly, Rob noted that while expenditure went towards the app and its development, a large proportion of the budget also had to go to attracting customers.

“In the beginning, to on-board customers you have to attract them with promotions and in turn this meant basically subsiding meals,” he said.

“So for example you might be earning £3 commission, but you’re giving £5 away, and this eventually catches up with you. But this was the only way to compete by offering promotions.”

All factors compounded, Pronto Eat was unable to compete against much bigger rivals like Deliveroo and Uber Eats.

“They had more of everything; primary ammunition is money and manpower resources,” said Rob.

“In the development stage of the app, we had 1.5 to 2 engineers. Compare this to Deliveroo which has around 300 engineers in the UK.”

INVESTORS THAT MATTER

On reflection, Rob said the selection of investors could have been better.

“There was a realisation that we were surrounded by people who looked good on paper and said that they would introduce us to family offices but [this] didn’t materialise,” he said.

Investors should have focused on the product first, according to the co-founder. “At the beginning, we were purely web-based and the various market forces presented us with various challenges where we needed cash.”

The business required a minimum of £25,000 monthly but lack of capital meant operations were severely hit.

“We were getting less than 50%, around £7-8,000. It was not enough for costs, IT and running costs per month.”

Reflecting on Pronto Eat’s experience of a lack of support from Islamic investors, Rob argued that Islamic venture capital investors have some way to go with tech start-ups.

“They [Islamic investors] don’t have a good understanding of new tech start-ups and how these start-ups could potentially disrupt the technology sector.

“Islamic VC investors expect a return within 12-36 months. But in reality your returns come in 10 years. The notion of instant profitability is a fantasy,” he lamented.

Rob pointed to the example of fellow UK Islamic economy start-up Muzmatch that has raised most of its capital from non-Muslim or non-Islamic sources.

“There are some amazing leaders demonstrating innovations and there are some amazing products. But they don’t receive financing from Islamic investors.

“For example, if you look at Muzmatch, the owner had to go to the U.S. and get funding from non-Muslim investors because they understood. This is despite the fact that Muzmatch has been successful within the Muslim community.”

Muzmatch most recently raised $7 million in Series A funding in July last year led by returning Silicon Valley investor Y Combinator and New York-based Luxor Capital.

Rob contends that trust still remains an issue among Islamic investors and consumers.

“Deliveroo is non-Muslim but there is a trust element. Similarly with Tesco there isn’t a question about trust. However, if a Muslim sets up a similar business and has all the credentials there is still a lack of trust,” said Rob.

“Muslims don’t want to trust Muslims, and that is sad,” he said of Pronto Eat’s journey, which he considers “humbling”.

“The level of understanding among Muslim investors particularly in the tech sector and in terms of financial culture needs to develop beyond the basics,” said Rob, referring to the predominance of assets such as real estate in Islamic portfolios.

WRAPPING UP

Rob and Musa Ahmed are in the process of negotiating the sale of Pronto Eat’s technology.

According to him, Mian Ali may take control of the existing infrastructure.

“We’re exploring the sale of tech that’s been built (pending release), but this is an early stage conversation and Mian Ali will be part of the conversation when it comes to any actual sale,” he said.

He considers Ali a positive investor.

“Mian Ali has been a great support to us, he provided temporary capital and bridge loans. However we can’t expect him to do all the heavy lifting,” said Rob.

He said it is likely Ali will acquire any remnants of Pronto Eat’s customer database and technology, although the app is highly customised. 

“He [Mian Ali] is based in Pakistan and running a food start-up remotely is operationally difficult. So he may decide to relaunch the app in Pakistan or Asian markets,” said Rob.

(Reporting by Hassan Jivraj; Editing by Emmy Abdul Alim [email protected])

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