Economics

Food Delivery Startups Combine To Combat Uber, Amazon In India

Not long after UberEats launched in Mumbai back in May, rumors began circulating that restaurant guide and on-demand food delivery service provider Zomato was picking up smaller rival Runnr in a bid to maintain market share.

Zomato has put those rumors to rest, completing the acquisition of Runnr for an undisclosed sum. The deal doubles down on Zomato’s position in India’s expanding food delivery space. It also beat Uber to the punch.

Almost as soon as rumors of Zomato’s interest in the “last mile” specialist surfaced, news of Uber offering Runnr a term sheet emerged along with word that ecommerce giant Amazon and fellow Indian food delivery startup Swiggy were among those eyeing the company.

Runnr will now operate as an independent logistics subsidiary under the leadership of CEO Mohit Kumar, an arrangement that ensures Runnr will continue offering its full stack of logistical services in pharma, grocery and ecommerce—which will give Zomato a slice of that action as well, according to its CEO Deepinder Goyal.

The VC-backed logistics startup fulfills some 300,000 orders a month, a figure representing roughly 10% of Zomato’s food ordering volumes. Runnr previously raised $7 million in a round led by Nexus Venture Partners and Blume Ventures in August of last year, with Russian billionaire Yuri Milner also participating in the funding. The startup has raised almost $30 million since its founding in 2015.

For its part, Zomato counts Sequoia India among its backers. The company has raised a total of about $243 million in venture funding, garnering a valuation of $900 million in 2015, per reports. The deal for a fellow VC-backed food delivery company highlights the rise of VC activity in India, especially in its booming ecommerce and mobile markets, as well as the need for, if not the inevitability of, consolidation among VC-backed companies as the delivery space in India matures.

VC investment in India

VC investment in India

Thus far this year, mobile has accounted for the preponderance of VC activity in India at more than 26% of completed transactions, with ecommerce ranking third at 12% behind SaaS at some 16%, per the PitchBook Platform.

M&A activity in India’s food & beverage space has fallen for the third straight year from a high of 16 completed acquisitions in 2014, which accounted for some $700 million in deal value. Meanwhile, M&A in Indian ecommerce and mobile—emerging tech verticals that food delivery companies like Zomato and Runnr also occupy—has reached a record high for the decade led by Flipkart’s $500 million acquisition of eBay India in July.

Related content: The 10 most valuable food delivery companies.

Article by Adam Putz, PitchBook