Start-ups Go For The Cost Cuts As Fund Raising Gets Tougher

Start-ups go for drastic cost cuts as fund raising gets tougher.

- Goutam Das

At online grocery start-up Grofer’s aggregation centre in Gurgaon, Co-founder Albinder Dhindsa shows an orange-coloured delivery bag, one that his delivery boys once carried on their backs, zipping across more than 20 cities in bikes to deliver everything from lemons to detergent powder. From the time the orders were placed by customers, they had two hours to deliver. That’s the nature of the hyper-local, on-demand business Grofers played in. But the bag would hold only two crates. As volumes shot up in many cities, the company employed more and more bikers. One delivery boy couldn't do more than nine orders a day; the size of the bag limited the volume they could execute.

Realisation struck Dhindsa early in 2016. The on demand model would work but at a huge scale. However, investors no longer had the appetite for the amount of capital it could require — in people, aggregation centres, and other parts of the supply-chain. Although Grofers had raised $120 million in November 2015, the funding climate was getting chillier. The online grocery sector, itself, was in a crisis; Grofers closed down operations in nine cities in January last year as scale remained elusive even after a marketing blitz.