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How restaurant tech startup iCHEF gets back on its feet after the famous Hsu event
In the US, many restaurateurs have gone paperless and managed orders and payment on tablets integrated by point-of-sale (POS) vendors such as Jack Dorsey's Square. In Asia, restaurant owners are doing something very similar. Currently, about 8,000 restaurants in Taiwan, Hong Kong, Malaysia, and Singapore are using an iPad-based POS system built by a Taiwanese startup called iChef for their daily catering operations.
Founded in 2012, iChef streamlines dine-in and takeaway services, from table management, menu editing, billing, discounts, to reward points by consolidating these functions into one interface on iPad. It also produces analytical reports for managers to oversee the entire operation.
The man behind iChef
It only took the company less than five months to set up the business and finish the foundation of the system. It becomes kind of self-explanatory when one figures out the identity of the founder: Sean Hsu An-sheng.
Hsu is not only the founder of Mazendo but also the son of Hsu Chung-jen, entrepreneur and former Pxmart president also known as "father of convenience stores in Taiwan". Hsu Chung-jen later joined the company as the chairman of the board in 2016 and cited his son as the main reason for his appointment.
When Sean Hsu was running his spicy beef noodles restaurant chain Mazendo, he noticed that its work flow was not ideal, and the existing POS terminals were fixed and too big. He wanted a simpler mobile device and system that can enable a seamless customer dining experience and improve the workflow of waiters and chefs, and therefore he decided to design his own system with four other specialists.
Ambitious beginnings
iChef is ambitious in early stages. In 2015, when there were only 450 restaurants in Taiwan using its system, the company set a target to triple the amount within nine months. The company has three main tactics to reach its goal.
The first one is to gather Taiwan's restaurateurs and listen attentively to their demands. Sean Hsu pinpointed iChef's competitive edge to its capability in understanding the real problems the food service industry encounters on a daily basis. He said only through understanding these challenges, he could modify the system to cater to the needs.
iChef started a community for restaurateurs and organized monthly meetings. He also debuted a blog for the community and a monthly newsletter. Based on their feedback, iChef updated its system and launched the new version in 2015.
Hsu's second strategy is positioning iChef as a growth platform. The POS system would evolve according to the restaurateurs' changing needs. So for business owners, iChef is a long-term investment instead of a one-time purchase.
The last strategy is moving towards an online-to-offline (O2O) business model. From 2014 to 2015, iChef announced partnership with Foodpanda and Chinatrust Commercial Bank (CTBC) respectively to scale up its delivery market and launch mobile payment functions.
The episode with Hsu Chung-jen
On 10 April 2017, Hsu Chung-jen announced stepping down from the board. Meanwhile, 21 employees have rendered a vote of no confidence to oust two co-founders Ken Chen (who is also the CEO) and Benjamin Wu, further amplifying the situation into a full-blown crisis. Despite their failed attempt to unseat the co-founders in the end, the incident has shown outsiders a fissure within the business, which is bad for the brand image and future fundraising.
Hsu called out the startup for being disorganized in most operational areas such as operating cost and data. Even though the company was full of potential, this could not justify its poor operation model and leadership for him. From the financial statements, he learnt that the bigger iChef’s user base was, the more money the company lost. Furthermore, he argued that the company failed to retain existing clients and often bypassed the board to make important decisions such as big salary adjustments. Hsu said he had proposed solutions to the leadership but his ideas were not welcomed. Specifically, he didn’t get along with Chen and Wu. Because of these concerns, he asserted that the company was going to run out of money soon and decided to step down.
In response to Hsu's accusations, Chen admitted that the leadership team had made a lot of wrong decisions in the past year, for example, making disproportionate return on investment, and he was authoritative as a leader because he seldom explained the motives of new directions to employees. Chen and fellow leaders planned to take in Hsu's advice despite his abrupt departure.
He reassured that the business is not running out of money anytime soon, further explaining why it appeared that they lost more money when they gained new customers. He cited that as a one-time situation because the company scaled up their research and hired many back-office staff the year before. The company currently had no plan to expand their teams and halted overseas expansion, and therefore he believed that the financial statements would not look so gloomy anymore.
Commenting on the scandal, Taiwanese entrepreneur with years of SaaS expertise Mark Lin,the founder of SEO startup Awoo Intelligence, wrote an article on to defend iChef. He explained iChef's financial situation is a classic and typical example of SaaS startups' cash flow cycle, and the company is on the right track. Instead of judging a SaaS startup based on its operating cost, one should look at its long-term value (LTV) and customer acquisition cost (CAC).
Surviving the scandal
In most situations, an ominous remark made by a famous and powerful figure in the business world will pull the plug on a startup or at least bring it to a grinding halt. However, this is not the case for iChef. The company has made a remarkable turnaround.
Within the same year of Hsu's resignation, iChef announced the business has turned the table and has positive cash flow, with its revenue surpassing NT$100 million (US$3.5 million). It also reached over 3,000 users in the second half of the year. iChef announced a partnership with KGI Bank to launch the "iChef Restaurant Loan" service. The AI loan service analyzes the data gathered on iChef and identifies the potential restaurants that are eligible for loans regardless of its size.
In the first half of 2018, iChef's user base continued to surge to meet the 4,000 benchmark, resulting in NT$70 million (US$2.5 million) in revenue.
In 2020, amid the pandemic, following the partnership with Facebook, iChef collaborated with UberEats and LINE to connect orders made on delivery apps to the restaurants' POS system, fast-tracking the meal prepping and delivery process.
iChef also announced raising NT$150 million (US$5 million) in a Series B funding round led by JAFCO Asia's venture capital. Other participants include Chinese Development Financial and Darwin Venture. On top of that, the company is eyeing an IPO.
Wu said he hopes local software talents can reconsider the option of staying in the territory before going abroad because of iChef's success.
In March this year, iChef inked a partnership with Google to introduce the function of opting in Google My Business (GMB) to iChef users, which can improve a site on Google's search rank. The company said in the age of delivery meals, restaurant owners either have to develop an omni-channel or pay a large sum of money for advertising. For SME restaurants, the second option is unrealistic. That's why even though iChef has successfully attracted the big names in the food and beverages industry, it would also take care of the small restaurants and develop functions for them.
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