Carthero Technologies Pvt. Ltd, which runs on-demand food-ordering platform Runnr, is trimming its food delivery services in both Bangalore and Mumbai, the two cities where they are operational, a top company executive told VCCircle.
The company is shutting down its business-to-consumer (B2C) operations in a number of locations across Bangalore and Mumbai to focus more on its business-to-business (B2B) services. Following the scale-back, its food delivery services will be reduced to a total of 40 localities in these two cities, Mohit Kumar, co-founder and CEO of Runnr, said.
On Tuesday, the company sent out an SMS alert to its users that read, “Dear customer, we are going to discontinue our food delivery services in your locality and you will not be able to use 'Runnr-Food Ordering App' after April 30th.”
Kumar said it was a business decision and there will not be any layoffs.
Runnr was formed after on-demand logistics startup Roadrunnr acquired troubled food-ordering startup TinyOwl in a share-swap transaction in June last year, a deal orchestrated by the common investors of the two startups. Roadrunnr then pivoted to food delivery, focusing largely on the consumer side.
Kumar said food delivery contributes about 80% of the company's revenue, and insisted that it will continue to be its major income source. He added that Runnr will relaunch the services in the now-shut localities, but did not give any timeline.
However, it seems the company is again pivoting to focus more on B2B services, which was the original model. Founded in 2015 by former Flipkart employees Kumar and Arpit Dave, Roadrunnr started off as a provider of hyperlocal logistics services to merchants, restaurants and e-commerce companies, enabling them to deliver orders by connecting with a local delivery fleet.
Its B2B services are present in Delhi, Chennai, Mumbai, Pune and Hyderabad. According to Kumar, the company offers B2B delivery services across 15 categories.
Although Kumar declined comment on the reasons behind the move, it points towards an impending fund crunch given online food delivery startups have been facing mounting losses in India. According to a person with direct knowledge of the developments at Runnr, the company has mandated GCA Savvian Corporation, an investment bank based in Japan and the US, to raise $10 million in its next round.
In July 2015, Roadrunnr had raised $11 million in Series A funding from Sequoia Capital, Nexus Venture Partners, Blume Ventures and others. Following the acquisition, Runnr secured $7 million from existing investors. Sequoia Capital did not take part in this round.
The online food-ordering sector in India is estimated to be worth Rs 5,000-6,000 crore, according to a report by India Brand Equity Foundation. However, the segment is transaction-driven and margins are wafer-thin.
Bangalore-based Swiggy, Runnr's main rival, posted a loss of Rs 137 crore in FY16 on a total income of Rs 23.6 crore. Another major player, Zomato Media Pvt Ltd, saw its pre-tax loss widen almost four-fold to Rs 492.27 crore in FY16 from Rs 136 crore the year before.