Sequoia, Matrix commit $7.6m to India's TinyOwl

The new capital will give TinyOwl 12 months of run time to focus on creating a sustainable business model, The Economic Times reported, with CEO Harshvardhan Mandad, confirming that the company is in the midst of a restructuring. Various initiatives have been introduced to cut costs and control the cash burn rate, with VCCircle reporting in September that 100 staff had been sacked.

"In the last few months, we have fully outsourced our last-mile delivery to partners including RoadRunnr, Opinio, Shadowfax. This move helps us focus sharper on our core technology and processes as well as significantly cut costs of delivery," Mandad added. "Our costs have come down by 43% with this realignment."

Found in 2014 by a group of Indian Institute of Technology - Bombay alumni, TinyOwl provides a location-based mobile app that allows users to make food delivery orders from a range of restaurants. Customers are then able to track their orders through the app and pay by cash or credit card.

The start-up initially raised $1 million in August 2014, and followed up with a $3 million Series A round led by Sequoia and Nexus in December. A $16 million Series B round, led by Matrix and featuring existing backers Sequoia and Nexus Venture Partners, followed in February.

At the time, TinyOwl was looking to expand into 50 cities by the end of the year and increase volume from 3,000-5,000 orders per day to more than 50,000. Now the focus is on shifting order processing to a merchant app and using call center services in select cases and for select restaurants, in order to reduce overheads.

TinyOwl's troubles point to growing weakness in the food delivery space, which has become an emerging focal point for VC investors. Rocket Internet-sponsored FoodPanda - an emerging markets player with a strong presence in India - has received $310 million since launch, while Zomato has raised in excess of $160 million and has expanded into food delivery.

There has already been evidence of some consolidation, with online grocery marketplace Grofers recently acquiring food delivery platform SpoonJoy alongside logistics player Townrush.

Grofers is one of a host of hyper-local online grocery platforms in India to have received VC funding. Grofers and BigBasket lead the way in terms of fundraising, having received $45 million and $90 million, respectively, while PepperTap recently completed a $36 million Series B round. Two of the companies to which TinyOwl is now outsourcing delivery services - RoadRunnr and Opinio - have also received capital.

However, industry participants have warned that grocery specialists, like many other segments in the online-to-offline (O2O) services market, will likely see increasing competition. This will in turn put expansion-minded business models under pressure.

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• Topics
• Technology
• Consumer
• Venture
• South Asia
• India
• Venture
• TMT
• Consumer
• Matrix Partners
• Sequoia Capital
• Logistics