India’s food delivery sector is back in action. After Zomato’s takeover of Uber Eats’ operation in India, the market has become bipolar, with both Zomato and Swiggy competing for dominance. And in order to compete with the combined forces of Zomato and Uber Eats, Swiggy has raised $113 million as part of its Series I funding round, led by Prosus Ventures.
With the over $350 million acquisition of Uber Eats India, Zomato got direct access to Uber Eats’s existing customer base, in exchange for 10% shareholding in the Gurgaon-based startup. Also, to further milk this cow, Zomato offered free 3 months membership of its Gold version to existing users of Uber Eats, a move that has worked phenomenally for the joint venture.
To counter this, Swiggy had to raise money immediately, which it did in a round led by Prosus Ventures, a name that carries a lot of weight in the industry. The company was valued at $3.6 billion, which is just a tad bit higher than the $3.3 billion valuation it had in a round earlier, signifying that raising capital could be a difficult road ahead if companies do not start showing sustainable business models.
Interestingly, Sriharsha Majety, co-founder and chief executive of Swiggy said that the capital will be used in developing new lines of businesses, including the delivery of non food based items. The company may also venture into cloud kitchens to get to profitability, a figure that both Zomato and Swiggy have been gunning for quite some time but still looks out of grasp.
While both the companies have been growing at a tremendous pace, with Swiggy reporting that it grew by a factor of 2.5 in volume transactions in the past year, both are burning through cash to acquire customers, spending north of $20 million a month in the process.
Swiggy has also introduced a new feature called Swiggy Go, which enables people to send packages around their city for a nominal fee. This is a part of Swiggy’s plan to bring other sources of revenue apart from the food delivery model. The feature is available only in select regions for now.