Swiggy closes $1.25 billion in funding, to double down on Instamart, acquisitions, talent
Food delivery platform Swiggy said it had raised $1.25 billion in funding, in a round led by SoftBank Vision Fund 2 and Prosus, as it wants to double down on its core business, make acquisitions and invest aggressively in its promising instant grocery delivery business Instamart, daily grocery delivery service Supr Daily and its pick up and drop service, Swiggy Genie.
“It is very exciting to have gotten the interest that we did as part of this round and have marquee investors like SoftBank. We had strong interest from internal investors like Prosus as well. For us it is a validation of the work we have been doing in food delivery and the huge opportunity that exists for Swiggy to go after over the next 10-15 years as we build on the beginnings we have made on convenience”, Swiggy co-founder and CEO Sriharsha Majety said.
Majety said Swiggy had plans to use the funding in three-four ways. It will continue to invest to grow the food delivery category. But, the most significant part of its investments will be into growing its non-food bets like Instamart where it sees huge opportunities. It will also continue to invest in hiring for the best talent in technology, data science and will explore mergers & acquisitions.
“Definitely we will be allocating a good part of the fund raise to the M&A strategy. There are a lot of exciting companies getting built and we want to dig in and see how we can partner together to drive stronger growth,” Majety said.
Reacting to its rival Zomato‘s IPO for the first time, Swiggy co-founder and CEO Sriharsha Majety said that it is great to see public market validation for the category that it operates in, adding that Swiggy hasn’t doesn’t have plans for now for a public listing.
“We would like to wish all the companies including Zomato that are going public this year, all the best. In terms of pressure, there is no pressure. We are a young company. We have our own strategy and investment plans. We want to do justice to them. Are we thinking about it (IPO)yes but there are no clear actionables at this point,” Majety said.
The round, which values Swiggy at $5.5 billion, underscores the investor appetite in India’s online food delivery space and comes at a time Zomato is preparing to list on the stock exchanges after receiving an overwhelming response for its initial public offering. Its IPO, the largest in 15 months, was oversubscribed 38.25 times during July 14-16 as investors put in more than Rs 2 lakh crore worth of bids for the Rs 9,375-crore issue.
Zomato’s much anticipated public listing comes at a time when the Indian startup ecosystem is witnessing a funding frenzy, with Indian startups raising $12.1 billion in the first six months of 2021, according to data from Venture Intelligence. Apart from Zomato, Policybazaar, Nykaa, and Delhivery are also firming up plans for a public listing, even as there is a buzz of Flipkart and Freshworks listing in the US.
The funding will give Swiggy firepower to compete against Zomato and stave off competition from Amazon, which launched its food delivery service, Amazon Food in May last year in parts of Bengaluru.
The Competition Commission of India recently approved the investment by SoftBank in Swiggy. SoftBank will invest $450-500 million in Swiggy at a post-money valuation of close to $5.5 billion.
Apart from SoftBank and Swiggy’s long-time investor Prosus, existing investors Accel and Wellington Management also participated. The new investors in the Series J round include Qatar Investment Authority, Falcon Edge Capital, Amansa Capital, Goldman Sachs, Think Investments, and Carmignac.
This also marks the first investment in the Indian food delivery category by SoftBank Vision Fund 2, which has been mulling an investment in Zomato and Swiggy for years, to beef up its global food tech and on-demand delivery portfolio, which includes DoorDash, GoPuff and Grab.
SoftBank’s billionaire founder and CEO, Masayoshi Son, it is learnt, had calls with Zomato founder Deepinder Goyal and Sriharsha Majety in April, after which he finally decided to go with the latter, as Swiggy built a more diversified business portfolio, leveraging its strengths in the on-demand space.
When asked about how he pitched to Masa, Majety said, “My pitch was about the company we were building, the opportunities we were going after. In terms of the company’s mission, categories we are going after, in terms of what Swiggy can do for our consumers with the capabilities we have built and the stickiness we have.”
Munish Varma, Managing Partner,SoftBank Investment Advisers, said, “We are excited to partner with Swiggy as they increase their service offerings and daily consumer touchpoints in the rapidly developing digital economy.”
Sumer Juneja, a Partner, SoftBank Investment Advisers, added: “From its early days, I have had the privilege to watch Swiggy execute on their vision to become the leader in the convenience economy. They have the railroads in place to empower multiple businesses to reach the new age consumer on a daily basis, and food delivery is just the beginning.”
Juneja, who currently leads investments for SoftBank in India used to be on the board of Swiggy a few years ago when he was with Norwest Venture Partners, one of Swiggy’s early investors.
Majety said the latest funding round was heavily oversubscribed following strong interest from investors and comes on the back of Swiggy’s rapid recovery from the shock of Covid19 and its subsequent growth.
While it started with food delivery 7 years ago, when it was founded in 2014, Swiggy is now a three-sided marketplace, building out Instamart and Genie, in addition to food delivery, even as it explores newer breakout categories like meat delivery.
Swiggy Genie competes with Dunzo, Flipkart, Amazon, and its online grocery service Instamart, where it’s up against players such as Flipkart, Amazon, Tata-owned BigBasket, JioMart, and Grofers, which counts SoftBank and Zomato as investors.
Swiggy has also expanded Swiggy Genie, to 65 cities and deepened the presence of its meat delivery service in key markets. It is also expanding, SuprDaily, its daily grocery delivery service, present across major Indian cities.
Harsha has two near-term challenges to tackle- on the policy side and the restaurant side. The government has come up with draft Consumer Protection Rules, which state that marketplaces cannot fund discounts or have private labels. This includes food tech platforms like Swiggy, which operates cloud kitchen brands such The Bowl Company and Homely.
The National Restaurants Association of India recently filed a complaint with the Competition Commission of India against Swiggy and Zomato, alleging that the practices followed by the two firms have an ‘appreciable adverse effect on competition” Smaller firms such as DotPe and Peppo have been trying to help restaurants with a direct ordering channel.
Even as smaller firms such as DotPe and Peppo have been working with restaurants to create a direct ordering channel, Swiggy has swung into damage control and recently started piloting ‘order direct’ in partnership with select restaurants in Mumbai. It has been in talks with restaurants for over a month and has been experimenting with sharing.
“For us the job is to continuously listen to our restaurant partners. We are committed to do even more … improve how we can work together to be able to offer the right kind of promotions to continue the growth of the category. We have even launched some pilots like Swiggy Direct etc to address some of the problems that they are talking about. Majety said.
Avendus Capital was the financial advisor to Swiggy in this transaction.
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