#InTheSpotlight: Grocery Shopping Platform Grofers

The e-grocer is all set to become a unicorn with a fresh round of funding from Zomato and Tiger Global.

The online grocery delivery service Grofers has reportedly entered into a deal with food delivery giant Zomato and American investment firm Tiger Global to raise $120 million. Zomato – which is expected to launch its IPO in July – will invest $100 million while the rest will come from existing investor Tiger Global.

The top shareholders in Grofers include SoftBank (51.9%), Tiger Global (19.2%), and Sequoia Capital (8.7%).

This is the e-grocer’s incredible journey.

Grofers began as a delivery service for small local merchants in December 2013 with seven stations in Gurugram. Co-founders Saurabh Kumar and Albinder Dhindsa started the company as a response to what they considered were loopholes within the logistic marketplace.

“When we were looking at the ecosystem, we saw that due to the lack of infrastructure, they [local merchants] were doing deliveries with their small staff of 1-2 people that were underage, unorganized labour,” Dhindsa said in 2015. “We wanted to push them towards getting more organized in doing these deliveries.”

He further said in a 2017 interview to OPEN magazine: “We wanted to build something ambitious, something meaningful that would provide real value to everyday customers.”

The company secured $500,000 in seed funding from Zomato’s founder Deepinder Goyal as well as Sequoia Capital and grew to a 900-member team spread across the country.

Two years after its launch, when Grofers was known as an on-demand delivery service, the company secured multiple rounds of funding. According to a TechCrunch report, after two rounds of $10 million and $35 million, the platform raised $120 million led by SoftBank in November 2015 – becoming one of the most heavily-funded hyperlocal companies in India.

Direction change

Soon after though, the company saw a bit of a downturn – closing operations in nine cities and laying off 10% of its workforce – amid an e-commerce crisis. In 2016, the startup scrapped its app-only model, launched a website, and shifted focus more towards its supply chain side. The company moved to a majority inventory-led business to take on the competition.

After a stagnant phase, the startup decided to rebuild itself when it secured about $62 million in a Series E round from existing investors SoftBank and Tiger Global. Their total valuation at the time stood at $226 million. What the company got right, which other players in the market didn’t was keeping its focus on building value for middle-class customers.

In an interview with YourStory in 2018, Dhinsada said: “What matters is finding the right product for the masses.” About a year later, Grofers got fresh funding from the Japanese investing giant SoftBank.

Pandemic-led surge

The Covid-19 pandemic in 2020 gave fresh life to hyperlocal food and grocery delivery services amid prolonged lockdowns. Dhinsada told Livemint in October 2020 that over 70% of customers who used their service for the first time during the pandemic were still shopping on their app. 

According to Inc42, during the lockdown starting in March 2020 and in subsequent months, the company claimed to have on-boarded 5,000 local stores as supply partners. To meet the rise in demand, Grofers further opened 23 new facilities in 2020.

Currently, the e-grocer operates in 43 cities in India.

Unicorn dreams

After the merger talks between Grofers and Zomato fell through, the latter along with Tiger Global now plans to give the e-grocer a $120 million infusion.

The fresh round of funds, according to an Economic Times report, will increase the valuation of the company to above $1 billion – making it a part of India’s unicorn club.

Amanat Khullar is the Content and Editorial Manager at ADIF.

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