Food aggregator firm TinyOwl and Hyper local on-demand logistics player RoadRunnr are merging in all-stock deal as a consolidation of consumer internet space at a time when fresh funding rounds are becoming difficult on the basis of profitability of the startup. The combined entity will build and brand a new consumer-facing product called “Runnr” in order to stand against the competition of other players of same domain like Swiggy and Zomato. The new platform is likely to be launched first in Mumbai by end of May.
Both of the startups have common investors, Sequoia Capital and Nexus Venture Partners, both of which are anticipated to push the deal.
The merger will result in the strong front and back end of the combined entity. TinyOwl has strong front end, consumer base, data analytics, sale, support and management team while RoadRunnr has strong back end technology. TinyOwl will continue to operate its app in localities where order volumes are high, and phase out eventually to the new brand identity “Runnr”.
TinyOwl was under investors’ pressure of growing transaction and cost cutting. Merger will help TinyOwl to develop new dimension of business, hence, enhanced revenue model. As part of cost cutting, TinyOwl had to lay off employees in November’15.
Online food ordering and delivery sector in India is estimated to be worth around 5,000-6,000 crore according to a report by India Brand Equity Foundation. According to a report by Morgan Stanley, online penetration in food and groceries is expected to increase from 3-5% in 2014 to 25-30% in 2020. Though such high figures are attention grabbing, the profit margins associated with the same are quite small. Market competition, geographic limitations and demand fluctuations are raising questions on sustainability of business model and forcing entrepreneurs either to change the business model or shut down.