Foodtech Startups Are Raising Funds, But What About Making Some Profits?
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Foodtech in India is one of the hottest space. Startups like Zomato, Swiggy and UberEats have changed urban India’s food consumption pattern – all thanks to the heavy discounts and ease of ordering food online.
In a tight tug war to win the number one place in the food tech segment, Zomato has raised $40 million from US investor Glade Brooke Private investors, according to documents accessed from business intelligence platform Paper.vc.
The funding is a part of the Series I round. Last October, the unicorn had raised $210 million from existing investor Alibaba's Ant Financial.
According to an Indian newspaper, The Economic Times, Zomato is planning to raise between $500-1billion to compete against its arch-rival Swiggy.
A few months ago, in December 2018, Swiggy has raised $1 billion as a part of our Series H Fundraise efforts led by Naspers, which included other investors like Tencent and Hillhouse Capital.
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Presently, Zomato is valued at about $2 billion whereas Swiggy is valued to $3.3 billion. Keeping the rivalry aside, UberEats and Ola’s FoodPanda is also trying hard to gain prominence in this space.
Ajay Ramasubramaniam, Director India, Zone Startups feels food tech is no longer about food aggregation or delivery. Elaborating on the opportunity for these startups, he says, "Food delivery in India is roughly a million meals per day. In China, Meituan-Dianping alone does 15 million meals per day. However, of the possible 90 meals a month, in China and Singapore people eat out or do a takeaway as much as 50 times."
“This is largely due to fast delivery, convenience, affordability and more choices. The numbers in India are now on the rise, with changing consumer habits, and increase in delivery only kitchens”, he shared while adding that, “Unicorns that are raising funds are putting it to use for building further tech capabilities around infrastructure, supply chain, new business models etc.”
While Zomato started testing international waters since 2012, Swiggy is still calculating its move. Last August, Entrepreneur India reported that Swiggy is likely to go to the international market in the coming fiscal year.
However, before focusing on the international market, both the startups need to focus on strengthening their domestic presence and driving actual numbers.
Quoting business intelligence platform Tofler, in FY 2017-18, Indian media reported that Swiggy recorded revenue of INR 468 crore with a loss INR 397 crore while on the other side Zomato revenue stood INR 466 crore with a loss of INR 106 crore.
Anil Joshi from Unicorn Ventures believes that food tech startups in India are certainly growing as since they offer ease of access to product, save people from traffic and finding good restaurants. And hence, as long as traction is they would find takers for their solution and funding will not be an issue.
“However if it is still a kind of free service or loss-making then they need to find a way to optimise and be revenue positive. If they are revenue positive then no issues or else will find a challenge to grow in future,” he added.