Swiggy's latest funding blitzkrieg bound to shake up its rivals

Food delivery firm Swiggy's $1 billion funding round has not just given its already envied valuation a massive boost but has also created a huge entry to barrier for the other players in the market.

While this funding gives fresh impetus to Swiggy's bid to maintain its position at the top, competitors such as Zomato, Foodpanda and Uber Eats will have to quickly figure out their counter strategy.

According to sources, the monthly burn rate of the company is close to $20-23 million. At this rate all it requires for an entire year is around $250 million. But it is planning to expand heavily across categories such as delivery only kitchens. It will also ramp up its its technology team. The idea is to focus on growth than profit.

"Yes it is (creating a barrier to entry). It is the biggest funding round in this space ever by a huge margin. Even Swiggy's last round was $210 million. This is another round in the next six months. It sends a strong signal to competition but more importantly, it also means that this company is here for the long run," Karan Sharma, who co-heads the digital and technology vertical for Avendus' investment, told Moneycontrol.

Avendus Capital was the financial adviser to Swiggy on the transaction.

The company's nearest competitor Zomato recently raised $210 million from Alibaba's payment affiliate Ant Financial and is in talks for another round of funding.

Interestingly, both Naspers and Tencent were investors in Flipkart and made impressive exits during its sale to Walmart. Many investors are reinvesting the money they made from the Flipkart exit back into the India market and food-tech is the beneficiary.

Interestingly, Naspers is also very aggressive in the food-tech segment globally. They have assets in Europe with Delivery Hero and Latin America with iFood.

"If the company is doing good, investors will pump in more and they have the right to participate," Sharma said on Naspers' decision to lead the round.

This deal creates a disruption in the food-tech space, which was expecting to see the entry of foreign players such as UK-based Deliveroo in India.

"The investors who were even thinking about investing in Swiggy's rivals will wait for sometime to see where the flow is. They will count numbers now because food-delivery is very different from e-commerce. Appetite of e-commerce business is far superior. For instance, $1 billion is a relatively smaller number for e-commerce but not for food-tech," said an industry expert requesting anonymity.

The food-tech market is also limited to the large 10-15 cities. These are cities that have huge number of migrant population staying there for work. The value for money and demand generation lies in these cities. The question is how will the companies be able to create a demand in the smaller cities in a country which cooks its own food everyday. For instance, e-commerce as business has penetrated in 600 talukas. On the other hand, food-tech currently is present in just 42.