Kabeer Biswas, co-founder and CEO of Bengaluru-based hyperlocal startup Dunzo, is staring at an uncomfortable reality. For a company that started out on the WhatsApp chat service to an app that delivers over 2 million orders per month, the last financial year really stung. Dunzo, which has raised $81 million since inception with a $200 million valuation, has seen its cash burn go up to $3 million a month in the past year—a whole million over the last year.
The startup’s losses jumped eight-fold to Rs 168.9 crore (~$23.5 million) on a total revenue of Rs 3.5 crore ($490,120) in the year ended March 2019. In December, there was news of Dunzo pulling out of certain pincodes in five out of the nine cities it is in—Bengaluru, Mumbai, Delhi-NCR, Pune, and most recently, Jaipur. Biswas acknowledges that the total number of pincodes has gone down by 50.
All in all, it isn’t looking too good.
While many major late-stage startups like Zomato, Swiggy and Flipkart have also seen their losses ballooning; Dunzo acknowledges that VCs were “scared” to invest in the company owing to the capital-intensive nature of the business. As Biswas says, “We are always raising.”
And yet, Biswas couldn’t be more sure of his company’s future. “I think in another three years’ time, we would like to be able to stop taking external capital.” Dunzo became a customer delight for its simple premise. Order what you like, and it’ll reach you faster than regular food delivery. Groceries, medicines, spare car keys from your house when you lock yours in the vehicle…anything.
It has been easy for Dunzo to be well-loved. It’s also easy to see why. The company’s core product is convenience itself, wrapped in a hyperlocal delivery format. That ‘Dunzoing’ became a verb bears testimony to this.
What’s not easy, though, is the larger hyperlocal space in India. Last-mile delivery startup Shadowfax’s CEO called it a “very dirty problem, day in and day out, it’s just a pure mess.” Hyperlocal often translates to low order values. Purchases are often cheaper—orders ranging from Rs 100-200—than the cost of running the orders.
Dunzo is no different. Its loss per order fluctuates between Rs 18-22 ($0.25-0.31) across the nine cities, Biswas admits candidly.
Today, Dunzo is in the unenviable position of being the first hyperlocal startup of its scale in India. Four years in, Biswas now needs to prove its viability—by hitting city-level profitability in one city by the next quarter and profitability in three cities this year.