Swiggy’s $1-billion funding proves investors are betting on India’s rapid digitisation

The $1-billion funding which Swiggy received from a clutch of investors including Naspers and Tencent last week shows that the food-delivery platform is playing the logistics game much better than its competitors.

It also shows that the foreign venture funds are acknowledging the rapid digitisation among Indian consumers and the ability of Indian food-delivery platforms to adopt technology to run their start-ups efficiently which traditional businesses failed to do.

“These investors are doubling down on the bet about India’s growing digitisation market. Rabindra Shrestha, Managing Partner for Prestellar Ventures, told BusinessLine . He said while venture funds are pouring money into customer acquisition, growing digitisation among the youth is giving them more confidence, and food delivery is a huge part of the trend. Consumption, coupled with convenience, is going to be a huge topic for India, Shreshtha said.

Strong platform

Kanwaljit Singh, founder and Managing Director of Fireside Ventures, said the venture funds are taken up by the efficient use of technology which food-service platforms have been able to put in place.

“I do believe that the food-delivery players, especially Swiggy, and to some extent Zomato, have built a strong platform which manages millions of deliveries and also a large consumer base,” Singh said.

Research and advisery firm Redseer Consulting said: “There are clear trends in customer and seller satisfaction supported by the better delivery speed and compliance that vouch for the superiority of the captive delivery model in the Indian market.”

On-time delivery of the order is one of the major expectations of the customers from the online food delivery players.

Restaurant deliveries have lower compliance compared with those fulfilled by the own fleet/third-party logistics partner. “It is becoming increasingly clear that food tech is more of a logistics play.”

Swiggy has so far secured $1.26 billion from venture funds, and with a valuation of about $3.3 billion in an industry which is worth $6 billion, it is expected to grow to $30 billion in another four years.

The fact that Swiggy is far ahead of the race, both in terms of the funds it has raised and the network, shows that it has learnt from the failure of some of the others. For example, Zomato and TinyOwl had to back down after rapidly expanding into tier-II and tier-III towns instead of consolidating their operations in major metros. This resulted in TinyOwl closing down most of its operations.

Naspers, one of the top investors in Swiggy’s latest round of fund-raising, said it was pouring in money into the start-up because it believes the food-service app has a winning formula. “And that can be seen from 10X the number of orders per month since our first investment and its expansion throughout India to tier-I, II and III cities,” said Larry Illg, CEO, Food and Ventures, Naspers.

But Shrestha cautions Swiggy and others. “It will be a battle of war chest initially. Once you capture the market, you become a dominant player. But the challenge will be on maintaining customer stickiness once it is past discounts.”

The key to success

Fireside’s Kanwaljit Singh provides a roadmap for the start-ups.

“The real opportunity will be to leverage the infrastructure or IP to keep bringing in more value and services to the consumers like their own private label brands, on demand CPG (consumer packaged goods) products delivery etc and sweating their infrastructure more economically.”

Swiggy, being the market leader, has a high chance of winning the game, but as Shrestha says, how it will spend the money efficiently will perhaps be the key to its long-term success.

COMMENT NOW