Naspers gobbles up another food delivery startup with $80M round for Swiggy



Naspers has taken a bite out of yet another food delivery startup, with its commitment to lead and $80 million investment in the Indian online ordering and food delivery startup, Swiggy.

The global internet and entertainment conglomerate has invested in several online food ordering and delivery companies worldwide including the Brazilian company iFood, and in Mexico, SinDelantal.

Earlier this month, Naspers committed a whopping $425 million to the German food delivery business, Delivery Hero.

Swiggy compares fairly squarely with Zomato — the billion-dollar India food service that has ventured overseas and recently suffered a high-profile hack — and Delivery Hero-owned FoodPanda, while new entries from Uber and Google have added more sauce to the competition.

News of talks between Naspers and Swiggy were first reported in April, by the Indian financial publication the Economic Times.

India’s food delivery market had been a juicy target for venture capital investors for a number of years, but the tricky economics of the business have proven costly for several of them.

By the beginning of 2016 venture investors had backed roughly 400 food delivery startups with roughly $120 million in funding, according to Bloomberg Business Week. 

But as the magazine reported, replacing traditional business models had proven tricky.

Luring customers with photos of tasty curries along with discounts and free delivery, they sought to disrupt the delivery networks that have existed in India since the 1890s, including Mumbai’s famously low-tech dabbawalas, who ferry 175,000 meals—some from cooks’ homes, others from central kitchens—to office workers and students daily. The time-tested deliverymen carry boxes via trains, bicycles, and pushcarts to their hungry clients, using a system of alphanumeric codes printed on reusable containers.

Indeed, the traditional businesses have proven to be so entrenched that a number of once-promising delivery businesses have been forced to shut down.

Tiny Owl was one of the businesses that closed its doors. The company had raised $27 million from white shoe venture firms Sequoia Capital and Matrix Partners, but the firms’ pedigrees were not enough to keep the doors open and the lights on.

Here’s Bloomberg’s report on the dwindling fortunes of Tiny Owl a few months before it finally closed.

The experience of TinyOwl is telling. The Mumbai-based platform to order food from nearby restaurants started in 2014 and raised about $20 million in its first year. Its workforce grew to about 1,200 in early 2015, and co-founder and Chief Executive Officer Harshvardhan Mandad said he planned to expand operations to 50 cities by the end of that year. By November the company had let go of 270 workers, mostly call-center employees and delivery personnel. When one of the co-founders arrived to break the news at the company’s office in Pune, a city near Mumbai, he was taken hostage by angry employees who demanded immediate payment of severance packages, technology news site MediaNama reported. Police were called in to rescue the executive, the report said. He didn’t respond to calls and text messages seeking comment. The company now operates in just two cities, with about 200 employees.

Despite that cautionary tale, India has welcome a couple of notable names to the table this year as Uber and Google both launched services, UberEats and Areo, respectively. UberEats is already a well-known name, not only because of the parent company, but the UberEats service itself is well established in the U.S. among other Western markets.

Uber’s entry into India’s food delivery space was predictable given the firm’s focus on building the UberEat’s business out globally, not to mention the level of resources it is pouring into the country’s ride-sharing sector now that it is exiting the Chinese market, where it was losing as much as $1 billion per year. In contrast, Google Areo came from left field. The service arrived without an official announcement or media push, all of which points to it as an exercise in testing the waters, perhaps with a view to introducing a fuller service in emerging markets in the future.

The investment puts Naspers in an interesting situation, since it already was indirectly financing FoodPanda through its investment in Germany’s Delivery Hero. That’s because Delivery Hero scooped up FoodPanda from Rocket Internet in December, although Delivery Hero counts Rocket Internet among its investors so the business is still kept in the family. (That deal was tipped to give Delivery Hero a push towards a much-speculated IPO — the proof will be in the pudding.)

Swiggy, meanwhile, seems to have weathered the storm that felled so many of its competitors. The company has over 12,000 restaurants on its delivery platform and delivers meals within 37 minutes of an order.

“Swiggy has shown impressive growth in a highly competitive market,” said  Sharma in a statement. “Naspers was attracted to the company’s exceptional execution in disrupting online food ordering and delivery in India while many players are struggling. Swiggy’s ability to create a sustainable business, earning consumer trust through a reliable first-party delivery technology, positions it well for success.”

In all Naspers has invested more than half a billion dollars into the food delivery space. As a result of its investment, the head of its India’s investment team will take a seat on the Swiggy board of directors.



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *