Zomato in talks to acquire delivery start-up Runnr in $20-million deal
Food technology start-up Zomato Media Pvt. Ltd is in advanced talks to acquire delivery start-up Runnr (Carthero technologies Pvt Ltd) in a move that will help Zomato strengthen its food delivery business, two people aware of the development said.
The deal is likely to give Zomato a captive fleet of delivery personnel, a model similar to its rival Swiggy (Bundl Technologies Pvt Ltd). While the final contours of the transaction are yet to be finalised, Zomato is likely to buy Runnr in an all-stock deal for about $20 million, said one of the two people cited above, on the condition of anonymity.
Zomato aggregates restaurants on its platform and works with third-party delivery partners such as Runnr and Grab, among others, to fulfil deliveries.
The company had invested an undisclosed amount for a minority stake in Grab (Grab a Grub Services Pvt. Ltd) in September 2015, to strengthen the food delivery business. Zomato started food delivery services in May 2015.
In a blog post in April, Zomato chief operating officer Surobhi Das had said that the company clocked revenue of $9 million in the year ended March 31, 2017— an eight-fold growth over FY16. The company’s advertising revenue, its core business until it entered food delivery in May 2015, grew 58% to $38 million in FY17.
Zomato claims to have recorded 2.1 million monthly orders in March.
In comparison, its nearest rival Swiggy clocked revenue of ₹23.59 crore (about $4 million) for the year ended March 31, 2016, from ₹11.59 lakh a year earlier. Losses bulged to ₹137.18 crore from ₹2.12 crore in FY2015, the company’s filing with the Registrar of Companies shows.
Zomato’s total revenue in 2016-17 rose 80% from a year ago to touch $49 million due to growth in advertisements and the food delivery business.
Between December 2016 and March 2017, Zomato had reduced its monthly cash burn globally to about $250,000, as against $4.2 million in March 2016, reported on April 7.
In May last year, HSBC Securities and Capital Markets (India) Pvt. Ltd slashed its valuation by about half to $500 million. Zomato had raised $60 million in September 2015 from Temasek and Vy Capital at a valuation close to a billion dollars. Overall, the company has raised about $225 million since inception in 2008.
Runnr, backed by Nexus Venture Partners, Blume Ventures and Sequoia Capital, has struggled to raise funds in the recent past. It has raised about $20-25 million since inception in 2015.
Runnr acquired Mumbaibased food delivery start-up Tinyowl Technology Pvt. Ltd in June 2016 and launched a consumer facing food delivery platform a couple of months later. The consumer-facing business has since been suspended.
“Runnr has reduced cash burn to $300,000-500,000 per month. But they have less than six months’ cash left. The current market scenario is grim and it may be difficult to raise more,” said the first person cited above.
A Zomato spokesperson and Mohit Kumar, co-founder and chief executive of Runnr, did not respond to emails seeking comments.