Roadrunnr, the Sequoia and Nexus VP backed on-demand logistics service provider and the not-doing-so-well food delivery upstart TinyOwl are reportedly in an early stage talk for a merger which could be an all-stock deal.

Both startups have common investors – Sequoia Capital and Nexus Venture Partners. By merging both companies, they are aiming to come out as an integrated hyper-local delivery service, a move which could perhaps benefit everyone — the investors and both the companies.

This ET report about a planned merger comes at a time when it is getting increasingly difficult for consumer internet businesses — and more so for these hyperlocal delivery models — to raise follow-up rounds. This has largely been due to deep discounts which these companies heavily rely upon for better customer acquisition and the painfully long time (which hasn’t come for any p[layer yet) that it takes to achieve break even.

The report quotes sources, saying that both companies have been in talks for the merger for a few months now and are still in the discussion stage. If the deal happens, the combined entity is hoping to raise close to $40 million.

If the reports are to be believed, both companies have enough cash to sustain in the market for another 10-12 months.

Some reports suggests that after the merger, the combined entity will be looking forward to offer services beyond food ordering and delivery services. They may expand the categories of services.

Roadrunnr was founded in February 2015 by Mohit Kumar and Arpit Dave. It is focusing on business-to-business deliveries. It makes use of an on-demand model to partner delivery boys and manage lean and peak demand, and charges businesses a flat rate per delivery.

It claims to be doing close to 25,000 deliveries a day on average with a fleet of nearly 5,000 delivery boys. It caters to merchants, restaurants and e-commerce companies, managing their deliveries in a cost effective manner while adhering to service level agreements.

TinyOwl on the other hand, was founded in 2014 by IIT-Bombay graduates Mandad, Gaurav Choudhary, Saurabh Goyal, Shikhar Paliwal and Tanuj Khandelwal. Recently, the company had raised $7.6 million. Prior to that, it raised $15 million in Series B round.

In December last year, it was also reported that FoodPanda, the Rocket Internet based food ordering platform, was in final stage of talk to acquire TinyOwl. Later, TinyOwl declined reports and termed them baseless, which they indeed were.

Additional inputs by Deepanshu Khandelwal.

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