Over the last year, food delivery apps like Swiggy and Zomato have seen phenomenal growth, as more and more users flock to their apps to get food delivered online to avoid physical contact. Now, as the demand is higher than ever, Swiggy has succeeded in raising around $800 million in a new fundraise, as expenses continue to rise. The new financial round has helped the startup inch closer to a net valuation of $5 billion, even though the company was forced to cut its workforce back in 2020, owing to the pandemic.
Co-founder and Chief Executive Officer Sriharsha Majety broke the news to the employees on Monday via email, and informed them that the financing had been obtained from Prosus Ventures and Accel, the existing investors, and from New deals with the well-known Amansa Capital, Carmignac, Falcon Edge Capital, Think Capital, and Goldman Sachs.
Though the new valuation at which Swiggy now stands was not disclosed, it was revealed that the fundraiser was “heavily subscribed given the very positive investor sentiments towards Swiggy.” Nevertheless, an insider did say that after the latest financial round, Swiggy now stands at roughly over $4.9 billion. This indeed comes as very good news for the company, as it seeks to expand its reach to other parts of the country. Since its inception, the startup has managed to raise around 2.2 billion dollars from fundraisers alone.
The recent benefit from the fundraiser adds Swiggy to the growing list of food delivery startups, which have seen a significant rise in their valuation despite the pandemic. The company’s rise in valuation comes shortly after their heavily-backed competitor Zomato continues to raise funding, having raised $250mn at a $5.4bn valuation in February. Zomato CEO Deepinder Goyal had said that the startup is planning to file for an IPO in the first of 2021, somewhere around June.
Swiggy too, had witnessed a successful round of fundraising last year, when it had raised approximately $157 million at a valuation of $3.7 billion USD. The aim of the company is to reach out to 500 million users in the coming 10-15 years, even as it competes with Zomato and Amazon, which is new to the food delivery scene (and is currently only primarily operating in Bangalore). As such, they seem to be looking to follow in on the footsteps of Meituan, the leading Chinese food delivery giant, which hit a bumper valuation of 100 billion dollars last year, and had a user strength of 500 million transacting customers.
This latest valuation is a step forward in helping Swiggy recover from last year’s pandemic, where it had to lay off a significant amount (about 1,100 people) of its staff, as well as had to halt the scale-up of its cloud kitchen operations, as the company had considered them to be “either highly volatile or not relevant for the next 18 months.” Shedding light on the issue, Majety wrote in the mail, “We’re coming out of a very hard phase during the last year given Covid and have weathered the storm, but everything we do from here on needs to maximise the chances of our succeeding in the long-term.”
The current growth seen by Swiggy and its competitors comes even as the Indian food delivery market is expected to reach a value worth $12 billion by next year. Currently, the leader is Zomato, having about 50% of the market share. Swiggy comes in second, and together the two firms make up over 80% of the total market share. As stated by experts, India’s take-rates stand at one of the highest, at 20-25%, with consumer traction constantly rising. This is bound to open up many new avenues, and it remains to be seen how these startups make use of it.