Dunzo's Dilemma, Startup Seeks $35 Million Lifeline with Drastic Valuation Cut
Dunzo's Drastic Makeover, B2B Focus and Cost-Cutting Measures
4 October 2023
Dunzo, a once-highly valued quick commerce startup, seeks board approval to raise $35 million through a rights issue at a reduced valuation of approximately $200 million, down from its peak valuation of $800 million.
Existing investors have committed $10-15 million at the lowered valuation, pending board approval. Founder and CEO Kabeer Biswas is actively pursuing the board's consent, including input from key shareholders like Reliance Retail and Google.
As part of its survival strategy, Dunzo is transitioning into a business-to-business (B2B) entity, focusing on business customer delivery needs. The company has also implemented cost-saving measures, including layoffs and store closures, while emphasizing Dunzo Merchant Services for its future growth.
Dunzo, the once high-flying quick commerce startup, finds itself at a pivotal crossroads as it seeks approval from its board to secure up to $35 million through a rights issue. However, this much-needed funding comes with a significant caveat: a reduced valuation. According to reports, the beleaguered company's valuation is set to plummet to approximately $200 million, a mere quarter of its peak worth of $800 million. This move reflects the challenging landscape that Dunzo currently navigates, with investors seeking to recalibrate their stakes in the company.
Several of Dunzo's existing investors have expressed their commitment to infuse $10-15 million of capital into the business at this lowered valuation. However, the company's board is yet to give its official nod to this proposal. Dunzo's founder and CEO, Kabeer Biswas, will soon approach the board, including influential shareholders like Reliance Retail and Google, in an attempt to secure the funding required to steer the company through these turbulent waters.
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One investor involved in the discussions revealed, "The current commitment is at around a $200 million valuation. That's also the blended average for most investors in the firm before it was valued at close to $800 million." The underlying commitment to this capital injection is anchored in Dunzo's transformation into a business-to-business (B2B) entity, primarily focused on catering to the delivery needs of business customers. However, a critical precondition for this funding is unanimous agreement on the new valuation among all stakeholders.
This financial conundrum comes on the heels of other significant developments within the company. Co-founder Dalvir Suri is poised to step down from his position as Dunzo grapples with a cash crunch and embarks on a comprehensive organizational restructuring initiative. The startup has already initiated multiple rounds of layoffs, salary reductions, and shuttered half of its dark stores as part of its cost-saving measures.
In its ongoing quest for survival, Dunzo appears to be refocusing its operations. It is moving away from its earlier quick-commerce model and has started offering services through third-party grocery stores. This strategic shift underscores the challenges faced by its consumer-facing business, with discussions centering on the possibility of discontinuation. Dunzo's pivot towards Dunzo Merchant Services, targeting 70-80% of its future business, may be the lifeline it needs to stay afloat in an increasingly competitive landscape.