Mumbai: Venture capital fund Lightbox Ventures is in talks to lead a $50 million funding round in hyperlocal on-demand delivery startup Dunzo amid renewed investor interest, said three people aware of the matter on condition of anonymity.
Mint first reported on 6 May that Dunzo is in talks with new investors to raise approximately $50 million.
The startup, launched on WhatsApp in 2015 by Kabeer Biswas, Ankur Aggarwal, Mukund Jha, and Dalvir Suri, provides a platform for people to get tasks done and products bought, picked or delivered. Dunzo, which is present in its home city of Bengaluru and five other cities including Hyderabad and Gurgaon, claimed to have crossed one million transactions in October 2018.
The company is looking to raise capital to remain competitive and expand to newer cities in the high capital-burn market of hyperlocal deliveries, where it now competes with the likes of Swiggy that is backed by deep-pocketed investors such as Naspers and Tencent. Dunzo expects to close the deal in the next month or two, the first person cited above said.
In February, homegrown food delivery startup Swiggy, last valued at $3.3 billion, announced its foray into hyperlocal delivery with Swiggy Stores—a move seen as a challenge to Dunzo’s business model. It started by piloting the programme in Gurugram with 3,500 stores, including 200 prominent brands such as Needs Supermarket, Licious, and MomsCo.
“Dunzo has a different structure, and Lightbox likes these platform businesses to invest in, which is driving conversations," said the first person cited above. “These businesses can take in any levels of capital, and growth can be adjusted accordingly. Dunzo seems to have figured out its unit economics, how partners should be incentivised to perform at adequate levels, and are managing customer acquisition cost at a low level," the person added.
Dunzo was Google’s first direct investment in India—the tech giant led a $12-million investment round in it. Dunzo also announced on 7 May that it has raised ₹5 crore from Kalpavriksh, the private equity arm of financial services firm Centrum. Dunzo’s other investors include Aspada Investment Advisors and early stage venture capital firm Blume Ventures. It had also raised ₹7 crore in debt funding from Alteria Capital, which provides loans to startups, in November last year.
Lightbox didn’t respond to mails seeking comment.
“We at Dunzo have constantly wanted to steer the narrative and conversation in the ecosystem to a better product, user experience and what makes a dent in the business. It’s our 2 cents’ contribution to what’s happening at large," said co-founder Kabeer Biswas in an emailed response to queries on its fundraising plans.
“It would be so awesome, if we could all do that. It would make all of us strive to do better only for the user— who in our case are consumers, delivery partners and local merchants," he added.
If Lightbox does invest, it would mark its second deal from its $200 million third fund. In March, it invested about $4 million in sanitary napkin brand Nua Woman, along with existing backer Kae Capital.
It has backed Rebel Foods, best known for cloud kitchen brand Faasos, and furniture rental website Furlenco, among others in the past.
Lightbox’s discussions with Dunzo underlines its growing interest in consumer centric startups. While Lightbox has backed consumer brands earlier, it is now looking to double down on the segment, which includes a wide range of sub-sectors—retail, consumer internet, food, health and education— founder and managing partner Sandeep Murthy said in an interview on 26 December.