On Wednesday, Dunzo conveyed to its employees that it would be unable to meet the postponed deadline for their monthly salaries due to mounting challenges at the hyperlocal delivery startup. Over the past 18 months, the company has expended more than $150 million in an unsuccessful attempt to replicate the business model of its younger competitor, Zepto.
The startup, headquartered in Bengaluru and backed by Google and Reliance Retail, informed its employees that their outstanding salaries, originally scheduled for September 4, would now be disbursed in the first week of October. In an email, the company reassured its employees that their prompt compensation remains a top priority, and they are committed to ensuring there will be no further delays.
Dunzo had previously deferred part of the June payroll for certain employees and postponed the salaries for all staff in July and August. These delays in salary disbursements are part of Dunzo’s efforts to streamline its cash flow while aggressively seeking new funding.
Despite being an eight-year-old startup that recently secured some funding, Dunzo has raised nearly $500 million in total and was valued at $757 million in its last valuation, according to market intelligence firm Tracxn. However, the company has been struggling to secure a substantial funding round for several quarters, falling short of its target of $150 million and raising only about $45 million in a recent funding round, as reported by the Indian news outlet Economic Times. TechCrunch also reported a late March update that Dunzo was finalizing a $50 million funding round.
In contrast, Dunzo’s rival, Zepto, recently announced a successful funding round, raising $200 million at a valuation of $1.4 billion.
Many startups worldwide are facing challenges in raising new funds as venture investors exercise caution amid economic uncertainties. Additionally, Dunzo operates in the cash-intensive sector of instant grocery delivery, which is experiencing consolidation trends globally.
Last year, Zomato acquired the struggling 10-minute grocery delivery startup Blinkit in a $568.1 million all-stock deal. Food delivery giant Swiggy, which also operates in the instant grocery delivery space through Instamart, has reduced the growth of its instant grocery delivery business in recent quarters.
Meanwhile, Dunzo has responded to its challenges by closing more than half of its “dark stores,” which are warehouses used for inventory storage, in recent quarters. The company is increasingly prioritizing its business-to-business offerings, as reported by the paper.
