Dunzo, a hyperlocal delivery startup, faces ongoing challenges as it struggles to meet its financial obligations, including employee salaries. Backed by Reliance Retail and Google, the Bengaluru-based company recently informed its employees about further delays in disbursing their wages.
Dunzo, which has expended over $150 million in the last 18 months attempting to replicate the success of its younger competitor, Zepto, has been unable to sustain its operations effectively. The company announced that employee salaries, which were already postponed, will now be released in the first week of October, instead of the previously scheduled date of September 4.
The startup has been grappling with financial difficulties and has resorted to deferring salaries as it attempts to improve its cash flow and secure additional funding. In June, Dunzo partially deferred payroll for some employees and subsequently delayed salaries for all staff in July and August.
In an email to its employees, Dunzo reassured them that it is prioritizing their compensation and is committed to resolving the issue as soon as possible. The company stated, “Ensuring that you receive your due compensation as early as possible is our top priority. Please be assured that we are doing everything to make this happen, and we are confident that there will be no further delays after this.”
Dunzo, an eight-year-old startup, has raised nearly $500 million in funding to date and was last valued at $757 million. However, the company has been striving to secure a substantial funding round for several quarters. Despite its initial target of $150 million, Dunzo was only able to secure around $45 million in a recent funding round.
Meanwhile, its competitor Zepto announced a successful funding round, raising $200 million at a valuation of $1.4 billion. The hyperlocal delivery market has experienced consolidation globally, making it challenging for startups like Dunzo to attract new investments.
Key Takeaway
Dunzo, backed by Reliance and Google, has once again delayed its employee salaries due to ongoing cash flow issues. The hyperlocal delivery startup has been struggling to secure sufficient funding and streamline its operations amidst fierce competition from rivals like Zepto. The delay in salary disbursement reflects the financial challenges faced by the company, which has recently focused on optimizing its business-to-business offering while shutting down a significant number of its dark stores.
The economic downturn and investor caution have further impeded Dunzo’s funding prospects. The company’s inability to excel in the cash-intensive sector of instant grocery delivery has added to its financial woes. Startups in the industry worldwide are grappling with similar difficulties, with venture investors becoming more cautious about new investments.
In response to the challenging market conditions, giants like Zomato and Swiggy have taken consolidation measures. Zomato acquired Blinkit, a struggling 10-minute grocery delivery startup, in a $568.1 million all-stock deal, while Swiggy has slowed down the growth of its instant grocery delivery business through Instamart.
As Dunzo continues to address its cash flow issues, it remains to be seen how the hyperlocal delivery startup will navigate the turbulent economic landscape and secure the necessary funding to sustain its operations.
