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Swiggy outsmarts the giants of Billion dollar start-ups!

Swiggy Startup Story: The hunger games aren’t all that uncommon in India and look who is on the top to battle the hunger monster. Investors have placed bigger bets on Swiggy as it vies with older peer Zomato to deliver piping hot food to hungry customers.

 

The two-restaurant search and ordering start-ups gulped nearly $2 billion of investor money this year. Swiggy got more than half of it. It raised nearly $1 billion from a clutch of investors this week, making it the largest online food venture in India valued at $3.3 billion, according to people familiar with the matter.

Let alone Zomato, Swiggy’s exponential growth breaches Flipkart? 

To put it in perspective, Flipkart, which is widely regarded as India’s most successful start-up, took a little over six years to enter the billion-dollar club. Swiggy, which was launched in the Bengaluru neighbourhood of Koramangala by Sriharsha Majety, Nandan Reddy and Rahul Jaimini, breached the same mark in less than four years, becoming the fastest start-up to become a unicorn.

 

  • As we all have seen the second most common phrase with “I’m hungry” follows “Let’s order SWIGGY!”. Given that, Swiggy is India’s largest and most valuable online food ordering and delivery platform.
  • Founded in 2014, Swiggy is based out of Bangalore, India and, as of March 2019, was operating out of 100 Indian cities. In early 2019, Swiggy expanded into general product deliveries, under the brand name Swiggy Stores.
  • This has been the best year yet for India’s food search and ordering start-ups. Swiggy and Zomato raised three times the funds’ food delivery ventures received in the last four years, according to data shared by Venture Intelligence.

  • Investor optimism comes after two years of consolidation when several delivery ventures either shut down or were acquired.

 

 

 

Investors on a roll, Swiggy it! 

The market, according to Redseer, is expected to boom as cheap data encourage online ordering. “The food-tech industry today is more about who is able to attract most money and investors, and then about services or innovation,” said Harminder Sahani of retail consultancy Wazir Advisors.

 

“There is not much difference in any of the players.” Zomato, which counts Ant Financial, Sequoia Capital and Temasek among its investors, has raised $610 billion in all from investors including Naspers, China’s Tencent and Meituan Dianping, out of which nearly $240 million was part of the secondary sale.

 

  •  Swiggy’s latest funding builds pressure on Zomato to raise more money, Satish Meena, New Delhi-based analyst at Forrester Research, said over the phone.
  • The investors who back Zomato won’t let Swiggy win the battle via capital, he said. Both t the start-ups have yet to respond to BloombergQuint’s emailed queries.

 

No Profits Yet!  

The pre-dominants were reasonably high. The investments come when both Zomato and Swiggy continue to report losses. Zomato, however, has fared better on that count. Its losses narrowed to Rs 106 crore in the year end-March. Compared with Rs 390 crore the year earlier, according to its filings with the Registrar of Companies, Swiggy made it. For Swiggy, the losses nearly doubled to Rs 397 crore during the period.

 

Swiggy Vs Zomato – The Real deal! 

What’s working for Zomato is subscription services and advertisements. Founder Deepinder Goyal, in a blog post earlier this year, said the company has brought down the overall burn rate from $15 million in 2016-17 to $11 million in 2017-18.

  • And the advertisement business is also growing at 20 per cent year-on-year.
  • Revenues of both the start-ups are similar as Swiggy has almost caught up with its older peer.

Swiggy’s sales jumped more than threefold over the previous financial year to Rs 442 crore in FY18. For Zomato, they rose 40 per cent during the period to Rs 466 crore.

  • While food ordering platforms have started charging a delivery fee, they are nowhere close to turning profitable. Discounting continues to go up with the cost of delivering food and that’s a concern, said Meena.

“They will have to keep on burning more to keep their edge.”

  • Swiggy needs to figure out a way to monetise it’s business better, said Meena. Zomato, which has built an advertising-based monetisation model, has to work on to how to make money through deliveries and cloud kitchen.
  • Still, Swiggy’s war chest allows it to dabble into multiple things and models.

“It doesn’t look monetisation is on their mind right now,” Meena said.

Swiggy has technology and execution advantage over Zomato, he said. For Sahani, cash matters more in this battle. The player who runs out of money first will be the deciding factor, he said.

 

Currently! 

Sources confirmed that the funds were raised at a valuation close to $1.3 billion, making Swiggy the second Indian food-tech firm after rival Zomato to be valued at over a billion dollars and currently the most valuable firm in the sector. The company has so far raised over $450 million in its 3-year 10-month lifespan.

  • Swiggy is shoring up capital to defend its position as India’s largest food-ordering app as rivals Zomato and FoodPanda focus on growth after receiving funds themselves.
  • While FoodPanda’s India business has been acquired by ride-hailing giant Ola, Zomato recently received $150 million from deep-pocketed investor Alibaba’s subsidiary Ant Financials.
  • “With this investment, we will continue to widen Swiggy’s offerings, along with bolstering our capabilities and plugging the gaps in the on-demand delivery ecosystem,” said Sriharsha Majety, co-founder and CEO of Swiggy.

While the company did not confirm it, Swiggy enters an elite club of a dozen or so Indian start-ups that are valued at over $1 billion, including firms such as Flipkart, Paytm, Ola, MakeMyTrip, InfoEdge, InMobi and MuSigma.

 

Catch the trend early!

  • For two of the founders, Majety and Reddy, Swiggy wasn’t their first rodeo together, so to speak.
  • The two BITS-Pilani graduates had come together in mid-2013 to work on an idea that would fully capitalise on the Indian e-commerce boom.
  • The duo built a technology product called Bundl that aimed to address a massive pain point in Indian e-commerce—shipping goods across the country.

 

However, significant challenges lay ahead. While India was experiencing an unprecedented internet start-up funding boom, investors, the world over, we’re also starting to become weary of the food delivery space, questioning whether it was possible for any venture to build a sustainable and sound business model. Most food delivery start-ups were running with hundreds of crores in losses.

 

 

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