In January 2022, Dunzo appeared unstoppable fresh from raising $240 million led by Reliance Retail. The company promised to deliver groceries to millions of Indians within 15 minutes.
Three years on, Kabeer Biswas, its sole remaining founder has left Dunzo marking the end of a venture that pioneered India’s hyperlocal delivery movement. ETtech reported on Thursday that Biswas has joined Flipkart to lead the ecommerce major’s quick commerce business Minutes.
A closer look at the events of the past few years reveals a series of strategic missteps, financial mismanagement, and operational challenges that eventually led to the downfall of Dunzo.
The hyper-growth trap
After closing its largest fundraise in 2022 where Reliance Retail invested $200 million, Dunzo ramped up its operations, pushing for hyper-growth. Its aggressive expansion of Dunzo Daily, a 15-20-minute grocery delivery service, became the central focus.
The company’s monthly expenses ballooned to more than Rs 100 crore, fuelled by expensive India Premier League (IPL) sponsorship and marketing campaigns that tripled business volume but led to unsustainable cash burn. Despite its expansion efforts, Dunzo struggled to shed its image as primarily a courier service rather than a quick commerce contender.
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As cash reserves dwindled and funding proved elusive, the company was forced to extend its delivery promise from 15 minutes to 60 minutes, hoping to lower costs through order batching. The problems multiplied by mid-2023 amid a broader funding slowdown in India’s startup ecosystem.
Failed investments, M&As
A potential investment from fintech PhonePe in Dunzo’s merchant network business failed to materialise, with the deal’s collapse partly attributed to concerns from other investors about PhonePe’s Walmart backing.
Similarly, Flipkart’s offer to acquire the company hit a wall when investors opposed selling the Dunzo brand.
Even Reliance Retail, which held a 26% stake in Dunzo, remained reluctant to infuse additional capital. The company’s attempts to raise funds through a rights issue at a significantly reduced valuation highlighted its increasingly desperate financial situation.
The ambitious expansion from seven cities to 15-16 proved to be a critical misstep. Dunzo was already grappling with operational challenges and mounting costs in existing markets when it pursued this aggressive scaling.
Business crumbles
A belated strateg
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