One of the major food-tech companies, Swiggy India, recently raised close to $343 Mn as part of its Series J funding round through a slew of investors. The fundraising is part of the $800 Mn funding round that is expected to value the company close to $5 Bn. The round was announced internally by Swiggy co-founder and CEO Sriharsha Majety last week.
Like any other startup, Swiggy had its own journey, filled with many ups and downs, highs and lows but what contributed to its triumph, is the consistent efforts to adapt to every day changing factors, an obsession to serve the customers, foreseeable sight into the logistics operations and the never back down attitude of its three founding members.
In this article we will cover the journey of Swiggy India.
BITS-Pilani graduates finally did it!!
Coming from diverse backgrounds, Sriharsha Majety, Nandan Reddy, and Rahul Jaimini faced their share of failures before trying their luck with Swiggy India. The first two are BITS-Pilani graduates who had together built a technology product called Bundl in 2013 to connect courier companies across India. However, they soon had to shut it down and decided to explore the food-delivery space.
They had the vision to build a sustainable and sound business model along with a strong product mindset but lacked the technical chops required to build an internet company. Then entered Jaimini, a former Myntra software engineer and IIT alumni. As the three co-founders put their respective skills on a table, a distinctive online food ordering startup, Swiggy India was born in August 2014.
Within a year of launch, Swiggy convinced many restaurants who were initially reluctant of the online channel of delivery to join forces with the platform. What differentiated it from other players, is the investment they made in building a proper logistics network with a vast fleet of their own delivery boys. It especially focused on customer experience due to which their clientele didn’t mind when they started charging for deliveries.
Seeing their business model working seamlessly, many investors got interested in funding the venture and Swiggy received its first cheque of $2 million from Accel and SAIF Partners. In the same year, the two VCs again funded the startup along with Norwest. By then, the startup already had over 100 restaurants onboard and was delivering over 70,000 orders on a monthly basis.
An entrant in an overcrowded market
When Swiggy started out in 2014, it was seen as a late entrant in an overcrowded market. The online food ordering and delivery market were not considered attractive back then, and Zomato, the leader in food-tech, had decided not to expand its delivery business, which was seemingly messy and unviable. Yet, in less than four years, Swiggy is part of the much-vaunted league of ‘unicorn’ startups. It has also forced an about-turn from Zomato, which is now investing hundreds of crores of rupees to catch up with Swiggy, which sits pretty at the top of the online food ordering business.
This food ordering and delivery startup Swiggy today has more than 5,000,000 mobile application installations and has become the household name for anyone and everyone who wants to order-in food.
Tying up with more than 25,000 restaurant owners, Swiggy has its own fleet of local delivery boys with operations across 13 cities in India, including Bengaluru, Mumbai, Chennai, Delhi, Hyderabad, and more. While their story today looks impressive, the founder’s success wasn’t achieved overnight, and there were a few roadblocks on the way.
Fierce competition almost killed Swiggy
The funding boom of 2014-2015 soon died down but Swiggy was yet to come down from the high. Once a major competitor in the food tech space, TinyOwl lost its presence, merged with Roadrunner to create Runner, and got acquired by Zomato within a span of a few months. While that was happening, Swiggy’s losses jumped 65 times for the year ended March 2016 and hence, the year was spent on cutting costs and strengthening its logistics network.
However later in 2017, With 6x growth in 3 years of its launch, Swiggy was leading the Indian food tech space, thanks to its customer understanding and adaptability. By 2017, the startup was introducing disruptive and highly differentiated service offerings. Understanding the need of the hour, it increased investment across core engineering, automation, data sciences, machine learning, and personalization.
In particular, cloud kitchens— a program that allows its restaurant partners to set up kitchen spaces in areas where they don’t operate, introduced back in 2015, had started creating a buzz among the millennials. The year witnessed Swiggy raising its biggest investment of $80 million in a Series E round of funding led by Naspers, as other existing investors also participated.
With Swiggy, the trio attempted something that no other online food ordering startup in India had ever done—they invested in building a proper logistics network, with a vast fleet of their own delivery boys. This, at a time, when many restaurants were not convinced about the online channel. Swiggy invested in a large sales force to bring and keep popular restaurants like Truffles and others on board. It also invested in building technology to make its logistics network more efficient.
To put it in perspective, Flipkart, which is widely regarded as India’s most successful startup, took a little over six years to enter the billion-dollar club. Whereas Swiggy, breached the same mark in less than four years, becoming the fastest startup to become a unicorn.
Facing up to a Pandemic:
The coronavirus outbreak has upended the food and beverage business, as the pandemic forces people to seek the safety of homes. While the debate rages over how safe “outside food” is, COVID-19 has led to a demand shock. The HORECA (hotels, restaurants, catering) segment along with food deliveries is in a slump and the road to recovery looks painful.
Swiggy has evolved its model during the pandemic lockdowns to keep pace with the ongoing shift in consumer mindset and brought the focus on building trust and reassurance contextually for the category.
The company decided on “being there for anything the consumers needed right from sanitizers to pizzas”, says TS Srivats, vice president, marketing, at Swiggy, while sharing the brand journey in the last few months.
The lockdown during the last few months brought mixed news for food delivery brand Swiggy. While the early months of Covid-19 were an intense phase with the brand trying to overcome countless challenges to keep the operations optimally running, the easing of the lockdown in July brought back demand and resurgence. Accordingly, the brand pivoted its offering and added the layer of trust and safety to its existing aggregator model of restaurants as well as expanded beyond its core offering of food delivery.
Swiggy is literally the only consumer internet startup from the 2014-2015 hyper-funding wave that continues to thrive. That wave was supposed to produce dozens of successful companies and a handful of unicorns. Once the dust settled, only Swiggy succeeded. Along the way, it has beaten both far older companies, such as Zomato and Foodpanda, as well as peers, including Tinyowl, which eventually collapsed. Here’s how.
Sharp focus on logistics
Swiggy’s success is part of a bigger trend in the startup ecosystem: companies that have controlled the entire value chain of customer experience have triumphed over pure marketplaces. Swiggy got a lot of things right, but the driving force behind its success is in its excellent logistics operations.
Food delivery is a huge opportunity in India and will continue to be one. Insiders see 2020 as a blip that may have pushed the industry behind by two years but it is not a lost opportunity. The industry, however, desperately needs technology intervention.
Amazon’s entry into food delivery in the middle of the pandemic is a case in point. The e-commerce-to-payments behemoth launched a pilot in Bengaluru a few months after it shut down its food business in the US. Word on the street is it is ready for more cities.
It means stiffer competition for battle-bruised Swiggy and Zomato but it is also a vote of confidence for the market. Estimates suggest that the food-delivery business contributes just $4.5 billion to a $65-billion food and beverage industry.
Growing internet penetration and demand for pre-cooked meals will see the Indian food-delivery market grow to $8 billion in the next three years, a Google-BCG report said in January 2020.
Swiggy was hopeful of moving towards pre-COVID levels as more restaurants resume operations and order volumes grow.
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