Investors pay big for India grocery exposure
The last year has seen an explosion of interest in India’s grocery delivery apps. Customers order food and other goods on their smart phones; the order goes to a buyer, who purchases the goods and then delivers them to the customer’s home. The approach is suited to a country where mobile phones are the primary form of internet access.
Grofers was one of the early entrants in what is becoming a crowded market. The New Delhi-based company, which guarantees delivery from the customer's preferred vendor within 90 minutes, differs from rivals BigBasket and ZopNow in that it partners with local merchants rather than delivering from a central warehouse. That means its customers enjoy the convenience of shopping online, while still patronizing local vendors they trust.
"This is very important for things like produce, flowers and baked goods, where you know who in your local neighborhood has the fresh, quality products that you are comfortable with," says Kshitij Torka, Grofers vice president of marketing. The appeal of buying local is a major reason why the company believes it can scale up from the three cities it serves now.
Grofers' expansion plans recently received a major boost with a $35 million Series B round, just months after completing the $10 million Series A. Most of the capital comes from two investors, Tiger Global Management and Sequoia Capital. Sequoia has been involved since the seed round in late 2014, while Tiger Global has participated since the Series A.
"Any time you want to bring in a new investor, it goes slower, because there's someone new coming on board. They need to do their own due diligence and other activities that have already been locked down by the current set of investors," Torka says. The company is happy enough with Tiger Global and Sequoia that it has yet to seek out new investors.
Grofers' competitors are not far behind: BigBasket raised $32.8 million in a Series B round last year, while ZopNow raised $10 million the same week that Grofers announced its Series B. Both have also announced aggressive expansion plans, BigBasket from three cities to 10, and ZopNow from four cities to 15.
Additional competition comes from large-scale online retailers Amazon and Flipkart, both of which have announced similar hyper-local grocery ventures. Amazon's service opened in March, and Flipkart plans to launch its own later this year.
The entry of deep-pocketed new rivals is worrying to Grofers, and it is one reason the company decided to seek new funding so soon after the last round. Though management is reassured by the faith investors have shown in them, they know they will need to make bold moves to compete with their competitors' big budgets.
"We believe that there is a habit-forming nature with this," Torka says. "If we can get to the users first, then we can win the market."
More on Venture
Latest News
Asian GPs slow implementation of ESG policies - survey
Asia-based private equity firms are assigning more dedicated resources to environment, social, and governance (ESG) programmes, but policy changes have slowed in the past 12 months, in part due to concerns raised internally and by LPs, according to a...
Singapore fintech start-up LXA gets $10m seed round
New Enterprise Associates (NEA) has led a USD 10m seed round for Singapore’s LXA, a financial technology start-up launched by a former Asia senior executive at The Blackstone Group.
India's InCred announces $60m round, claims unicorn status
Indian non-bank lender InCred Financial Services said it has received INR 5bn (USD 60m) at a valuation of at least USD 1bn from unnamed investors including “a global private equity fund.”
Insight leads $50m round for Australia's Roller
Insight Partners has led a USD 50m round for Australia’s Roller, a venue management software provider specializing in family fun parks.