The app, which connects low-cost couriers to thousands of individual merchants, has lured Indians with its rapid delivery of items ranging from groceries to parcels in traffic-clogged cities. The Bengaluru firm has so far raised about $140 million to date and aims to tap investors for roughly another $150 million in 2021.
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“The expansion only really starts next year at full pace, so we’ll raise the capital this year, but it gets deployed only next year,” Kabeer Biswas, Dunzo’s 36-year-old chief executive officer, said in an interview. The company may expand to two more cities in 2021, then build toward a presence in 20 urban areas by mid-2023, he said. It’s also started offering 15-minute deliveries for a range of 2,000 commonly-sought-after items.
Dunzo was founded in 2014 and started out as a WhatsApp service, before becoming an app where customers typically pay about $6 per order.
It’s tapping into growing Internet usage and accessibility in India, where tech and consumer startups are flourishing as the number of smartphone users nears 1 billion. E-commerce has been the quickest growing channel for fast-moving consumer good products in recent years, and now accounts for about 5% of all such sales, according to Jefferies.
Dunzo and other food delivery services have also seen Covid-19 drive competition as a second wave of infections sweeps India. Competing firms riding that boom include food-delivery app Swiggy, which said on Monday that it’s raising $800 million.
The growing imposition of state-level restrictions “is a negative development for consumption in general” but web-based retail will likely get a “boost,” Jefferies analysts, including Vivek Maheshwari, wrote in a report Tuesday.
Biswas said Dunzo doubled its annual sales in 2020 and expects the same rate of growth this year. Dunzo’s biggest operation in Bengaluru is now breaking even, he said.
However, the company is burning up to $2.5 million a month, though Biswas expects Dunzo to become profitable in 24 to 30 months. It may also look to expand in other markets in Asia in 2023, he said.
“You make 20 cents an order — the only way to make this business work is at scale,” he said. Still, “it’s important to be extremely disciplined in your geographical expansion, because you could suddenly start losing money everywhere.”