A day after my meeting with Dunzo CEO and co-founder Kabeer Biswas, stories about Dunzo’s financial parameters started hitting the headlines, largely after a Mint story looked into its financial filings with the Registrar of Companies (RoC). The numbers, ostensibly, look bad—in 2018-19, Dunzo’s losses surged eightfold over the previous year, to 168.9 crore, against operational revenue of 76.5 lakh.

These numbers are enough to alarm anyone not familiar with the investment-cash burn-growth cycles of tech startups, but experts know that despite the hand-wringing, they are not entirely incompatible with the expenditure to revenue ratios of many startups in a growth phase.

Just a few weeks before this, the company had raised $45 million (around 315 crore) in fresh funding from existing investors, including Google, Lightbox and 3L Capital. Dunzo’s competitor Swiggy, an older and bigger company with a valuation of over $3 billion, lost 397 crore in 2017-18, albeit against revenue of 442 crore, and has just entered Dunzo’s domain of hyperlocal delivery with its Swiggy Go and Swiggy Stores. Dunzo’s valuation as per the RoC filings is 400 crore, but existing investors have demonstrated their confidence in the company with a post-money valuation of $200 million after the latest round.

What does all this mean? Is it sustainable? How long will venture capitalists (VCs) continue to fund, often exorbitantly, tech startups “disrupting" everything from food delivery to urban mobility? No one seems to know. But what is undeniable is that technology startups have changed the way we live and work in cities across the world, and it’s probably easier to measure their cultural impact than analyse their numbers.

Regarding financial bottom-lines, it is clear that Biswas is taking a long view of things. Throughout our meeting, he goes back to the example of Amazon, founded in 1994, which took more than 15 years to start recording substantial profits. “Everybody who’s in the transaction business wants to build a business that looks like Amazon, because Amazon’s the oldest (tech-based) transaction business that exists, the most blue-blooded, right?" says Biswas. “We want to be like Amazon, but you also have to build like Amazon. We all seem to be in a three-year hurry to get somewhere. The first five years of Amazon were inconsequential—they were just trying to find the most scalable way to solve the problem."

Amazon might be the business role model Biswas wants to emulate, but if he has a personal role model for how to run a business, it has to be his father, who built a business in Gujarat and Dadra and Nagar Haveli practically from scratch. In the 1970s, he came to Mumbai from Barasat in West Bengal— from a “2,000 people village"—with 11 in his pocket. He hadn’t even finished school. In Mumbai, he got into the watch-repair trade and learnt the skills for a few years, eventually moving to Gujarat, where he set up his first shop selling watches. Within a few years, he was running a steel fabrication unit and several other small businesses across cities like Surat, Vadodara and Silvassa, the capital of Dadra and Nagar Haveli, where Biswas, an only child, grew up (becoming, quite possibly, India’s only tech CEO from the tiny Union territory).

His father suffered a stroke and died in his early 40s, when Biswas was just 19 years old. He died a dollar millionaire. “One of the reasons I can take risks and do things that interest me, instead of taking the safe route—I could have been selling derivatives in Singapore and making a crazy amount of money after my MBA—is that my dad left us in a good position, financially. My mother, who was also helping him in the business, is secure. I don’t have to worry about providing for her, I have no dependents," says 35-year-old Biswas, who has an engineering degree from the University of Mumbai and an MBA from Narsee Monjee Institute of Management Studies.

The tragedy of his father’s early death made him learn the value of money. “It always bothers me that even though we had a lot of resources when he became unwell, we couldn’t keep him back," says Biswas, who likes to talk rapidly in short sentences and seems uncomfortable talking about personal stuff, quickly bringing the conversation back to business-related matters.

Of late, Biswas has been thinking deeply about the maturity and evolution of internet businesses, and where they go from here, now that the initial euphoria and excitement around tech startups is wearing off and people are asking the hard questions about profits. “What tends to happen with the internet is there is always a 1.0 and a 2.0 (wave of companies). The 2.0’s usually end up finding the right business model. Facebook wasn’t the first social media platform; Amazon wasn’t the first e-commerce company. What they did right was to find the right customer and the right model," says Biswas.

“We want to be able to build a sensible business and we want to build it for the next 20 years, and we will figure out answers that are a lot more viable," he adds. What these answers are is a matter of some speculation, and some strategy.

Biswas is of the view that in the delivery and logistics space, if not the entire tech-based entrepreneurship space, at least one of the answers is to “attract consumers that are actually viable enough for service". This is certainly radical thinking. Till now, efficiency in acquiring customers was one of the key metrics for startups. But the “2.0 companies" have to change that mindset, says Biswas, and acquire more valuable customers. “If you are not going to be able to pay for it then, honestly, I don’t think you are the right consumer for us in the long run…. Stand-alone discounting doesn’t really work, and it tends to create bad habits."

While Dunzo started off in 2015 as a hyperlocal delivery service in some of Bengaluru’s most affluent areas, like Indiranagar, Koramangala and the central business district, with just one promise—making life easier for its users by performing tedious and time-consuming tasks, from getting couriers sent and laundry done to picking up documents and forgotten mobile chargers from homes and offices—it has grown into a marketplace.

Having spread to six cities and becoming the first Indian tech company to attract funding from technology giant Google in a direct investment in 2017, Dunzo today provides a platform to many local businesses as well. It has also stepped into food delivery, in direct competition with firms such as Swiggy and Zomato, besides continuing to perform many of the core functions that made it a cult favourite among Bengaluru’s tech-savvy and time-strapped upper middle class.

One of the things Dunzo is focusing on right now is providing a digital platform to local businesses that are offline. “What we are doing really is enabling the local economy…we are making a lot of local commerce a lot more efficient," believes Biswas. He relates the story of a local kirana store that was about to shut shop a few months ago when Dunzo signed it up as one of its delivery merchants. Today, the shop is turning profits for the first time in several years.

With the zeal of a true data nerd, Biswas also talks excitedly about the way Dunzo has used data about its core delivery areas in cities to make life easier for users. “What happens is, after we enter a geography, we start becoming very good at it. We start learning from it a lot more. For instance, Whitefield may look like one landmass to you, but to us, we clearly see from the data that it is split into four different zones with their own peculiar needs."

Once Dunzo understood that users in the well-to-do suburb were frequently searching for some specific foodstuff, it found a retailer who would be able to fulfil these orders and convinced him to come on board. “This kind of information wouldn’t have been available to anyone earlier—not to the user and not to the retailer who doesn’t know what his customers need," says Biswas.

Right now, the company is focused on cutting its average delivery time, which it believes will help control costs. In the past 18 months, Dunzo has been able to reduce the average delivery time from about 48 to 28 minutes, with almost 30% of orders being fulfilled within 15 minutes. This involves finding just the right fit between demand and supply, finding the right density of orders, and integrating merchants a lot more closely, says Biswas—and all this rests on data.

“It’s a lot of tech. So right now the algorithm sees that there’s a lot of surge in demand in the Sarjapur Road area, so it moves delivery partners towards…Plus Point Hypermarket?" he says, naming a popular supermarket on a busy street in a Bengaluru suburb with a high density of frequent users.

While the nuts and bolts of his business clearly still excite him, in the medium term, his plan is to keep doing what is working for the company right now: Bring down the cost of delivery, reduce delivery time, and start making money off each delivery (he claims that in its top 10 geographies, the company is operating at a 13-14% margin in its transactions). He returns to his Amazon example: “Numbers, when they grow, are very sexy, and you find validation very quickly. But rapid scaling gets very expensive, and my favourite story on this continues to be Amazon. Here’s a business that has never grown 300% in one year, but it has had consistent, compounded growth of 30% for 20 years."

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