BENGALURU : Hyperlocal on-demand delivery startup Dunzo is in talks with new investors to raise approximately $50 million, according to two people familiar with the matter.

The company is looking to raise capital to remain competitive in the high capital-burn market of hyperlocal deliveries where it now competes with the likes of Swiggy that has deep-pocketed investors backing it.

“Dunzo has been finding it difficult to raise money from financial investors," said the second person mentioned above, requesting anonymity. “There were some initial talks with Zomato for a potential acquisition, but that didn’t move forward," the person said.

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 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.

Dunzo was Google’s first direct investment in India: The tech giant led a $12-million investment round in it.

Google did not respond to queries sent by Mint. Dunzo and Zomato declined to comment. Dunzo has created a product that appeals to the users, but concerns about the unique-use cases and a business model around it have surfaced recently, say industry analysts and experts.

“It was a company that held a lot of promise but not sure where it’s going now," said an investment banker tracking the hyperlocal space.

“It’s a great consumer service but there is no way to monetize it and in areas in which it can be monetized, such as food delivery, bike taxi and grocery delivery, it already has strong players to compete with," the investment banker said.

Mint had reported on 8 March that Dunzo was in the final stages of closing a round of financing. The firm recently received an infusion as part of its Series C round from Greyhound Capital and a few others, according to its regulatory filings, sourced from data-intelligence platform Paper.vc.

Dunzo’s other investors include Blume Ventures and Aspada Investment Advisors. The company has also raised 7 crore in venture debt from Alteria Capital.

Earlier this year, food-delivery company Swiggy announced its foray into hyperlocal delivery with the launch of Swiggy Stores, which could be a possible concern for Dunzo’s business, according to industry analysts.

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