Farukh Kitchlew | Feb 19, 2024 | 0
The Unexpected Challenges Behind Dunzo’s Salary Delay
Dunzo, the hyperlocal delivery startup backed by tech giants Google and Reliance Retail, has informed its employees that it will not be able to meet the postponed deadline for their monthly wages. This announcement adds to the rising troubles faced by the company. Despite spending over $150 million in the past 18 months to mimic its younger rival Zepto, Dunzo still faces financial challenges.
In an email to employees, Dunzo delayed September 4th salaries to the first week of October. The message promised to pay employees their compensation as soon as possible. It also expressed confidence that there would be no further delays after this.
This isn’t the first time Dunzo has faced payroll issues. The startup had previously partially deferred June payroll for some employees and delayed July and August salaries for all staff. These salary delays are part of Dunzo’s strategy to streamline its cash flow as it aggressively pursues new funding opportunities.
Founded eight years ago, Dunzo has secured nearly $500 million in funding and held a last valuation of $757 million, as per Tracxn. However, its efforts to secure substantial financing have been met with challenges. While targeting a $150 million funding round, Dunzo only managed to secure $45 million in a recent funding round.
In comparison, Dunzo’s rival, Zepto, announced earlier this month that it had raised $200 million in a new funding round, valuing the company at $1.4 billion.
Dunzo’s fundraising struggles mirror those of startups globally in a weakening economy. Additionally, Dunzo operates in the cash-intensive category of instant grocery delivery, which has seen increased global consolidation.
Last year, Zomato acquired Blinkit, a 10-minute grocery delivery startup, in a $568.1 million all-stock deal. Meanwhile, food delivery giant Swiggy, through its Instamart platform, has also scaled back its growth in the instant grocery delivery business in recent quarters.
To tackle financial challenges, Dunzo shuttered over half of its “dark stores,” used for inventory storage. The startup is increasingly focusing on its business-to-business offerings to stabilize its financial position.
Dunzo is going through a tough time, and employees are worried about getting their delayed paychecks. They hope the company can bounce back and become stable again.