How Reliance Failed To Resurrect Dunzo

The issues at Dunzo mirror larger challenges faced by Reliance Retail across its portfolio. Despite its dominance in physical retail, Reliance has struggled to make significant headway in key areas. For instance, JioMart, its flagship e-commerce venture, has failed to meaningfully disrupt market leaders like Amazon and Flipkart, with reports indicating that the company expected to give it a second go under the quick commerce avatar. Similarly, Ajio, its fashion e-commerce platform, has lagged behind competitors like Myntra, despite aggressive marketing and discounting strategies.

Reliance’s ambitious Future Group acquisition, which aimed to consolidate its retail dominance, also fell apart after prolonged legal battles with Amazon. This left Reliance unable to capitalise on Future Retail’s extensive network, a setback that hurt its plans to expand its retail footprint across India.

These examples highlight a recurring pattern in Reliance’s new economy bets, including startups like Dunzo. The faltering of Dunzo, seen in the light of these broader struggles, is a perfect example of the limitations of how Reliance’s control-heavy approach pushed portfolio companies into the dark.

A Lifeline That Became a Curse?

In 2022, Reliance Retail provided much-needed capital to Dunzo in exchange for 26% equity in Dunzo, which was struggling with mounting operational costs and scaling challenges. However, interviews with former Dunzo employees and investors reveal that this deal was met with internal scepticism. “Many of us saw this as making a deal with the devil,” one senior former employee told TheCore. While the funds provided immediate relief, the long-term implications of having Reliance as a major shareholder were worrying. Employees feared that Reliance’s tendency to centralise control and dictate key decisions could stifle the company’s agility—a crucial requirement in a fiercely competitive quick-commerce market.

By mid-2023, those fears had materialised. Reliance, holding a 26% stake in Dunzo, had veto powers over major decisions, which it used to block a potential buyout offer from Flipkart, according to sources familiar with the matter. This veto decision baffled Dunzo’s management and left the company with limited options to recover. “It could have provided Dunzo with a much-needed lifeline, but Reliance’s refusal left us stranded,” the former employee added.

The Core has reached out to Reliance Corporate Communications for a response and will update the story once we hear back.

What Went Wrong?

Reliance’s entry into Dunzo was seen as a double-edged sword. While the capital infusion gave the company a chance to survive, it also brought a degree of control that left management constrained. Former employees pointed to poor financial oversight and Reliance’s unwillingness to allow a strategic buyout as key factors that sealed Dunzo’s fate. “The lack of strong financial leadership and impulsive spending on big-ticket items like IPL sponsorships drained funds quickly. When the market tightened, we were left without options,” the former employee said.

Even as Dunzo struggled to secure further funding, Reliance’s veto over the Flipkart deal was seen as a turning point. “Reliance’s refusal made no sense to many of us. It felt like they were willing to let the company sink rather than lose control,” the source added.

Dunzo, which was once a key name in India’s quick-commerce sector, has gone offline after the departure of cofounder and CEO Kabeer Biswas, who has now joined Flipkart. The app’s services had been on pause for a few months now.

The collapse of the hyperlocal delivery app symbolises the growing toll of hyper-competition and unsustainable business models in the consumer Internet economy. Once hailed as a disruptor for its hyperlocal delivery of groceries, medicines, and essentials, the app has joined the ranks of casualties from the consumer Internet dominance wars — a pattern evident across edtech, ride-hailing, food delivery, and now quick-commerce.

Dunzo was founded in Bengaluru in 2014, boasting a vision to redefine convenience. Backed by heavyweights like Google, Reliance Retail, and Blume Ventures, the company raised $449 million across 13 funding rounds, peaking with a valuation of $1 billion in early 2022, according to data sourced from private investment tracking platform Tracxn. However, by 2023, cracks in its financial foundation began to surface. Despite a 273% YoY revenue growth to Rs 253 crore ($31.5 million) in FY23, Dunzo’s net losses ballooned to Rs 1,801 crore ($225 million). Operating cash outflows of -Rs 1,299 crore accentuated its liquidity crisis, even as its liabilities mounted.

A string of failed fundraising attempts exacerbated its decline, according to at least two sources close to the company that Dunzo spoke with. A proposed $200-$300 million investment from a Middle Eastern private equity fund in late 2022—once deemed a lifeline — collapsed amidst the broader startup funding slowdown, said a former senior Dunzo employee.

"This deal represented a critical opportunity for Dunzo to stabilise and expand," the Dunzo employee explained. "This was the biggest breakthrough Dunzo had been working toward, but it never materialised. The investment was contingent on proving dominance in the quick-commerce market, which was difficult amidst fierce competition from Swiggy Instamart, Blinkit, and Zepto."

The failure to secure this funding, compounded by Dunzo’s inability to contain expenses and secure an effective CFO, further destabilised the company. Both the former senior employee and an early investor in Dunzo, speaking to The Core, highlighted the critical role poor financial management played in the firm’s decline.

The investor said, "Dunzo collectively raised around $449 million over its lifetime, which should have been more than enough to break even if managed properly. Unfortunately, the lack of effective cash management meant that resources were spent inefficiently, and the company burned through its funds too quickly. This reflects a broader issue in the startup ecosystem, where the assumption is that more capital can solve operational inefficiencies."

Experiments, Pivots, and Challenges

Dunzo went through three distinct business models. Initially, in 2015, it was a concierge service focused on task management. By 2018, it shifted towards hyperlocal store aggregation, backed by significant investor interest, and by 2021, the company pivoted to an inventory-led model relying on dark stores. These frequent pivots reflected Dunzo’s willingness to experiment and adapt, but they also brought in operational inefficiencies and the challenges of scaling rapidly in a hyper-competitive market.

“Competitors like Swiggy Instamart and Zepto later took lessons from Dunzo’s early moves, refining their models to secure stronger market positions,” added the former Dunzo employee quoted earlier.

Google’s entry as an investor in 2017 marked a major milestone, providing $12 million in Series A funding and validating the hyperlocal delivery concept. However, in 2021, Dunzo reportedly turned down acquisition offers from Swiggy and Tata Group. "The CEO and management genuinely believed they could carve out a top-two position in hyperlocal delivery," said the former employee.

Hence, Reliance’s entry into Dunzo’s cap table in early 2022 came at a critical time. Dunzo was grappling with mounting operational costs and an urgent need for capital to maintain its dark store model.

However, Dunzo quickly used up the Reliance capital, without proper CFO oversight. "The lack of strong financial leadership led to impulsive spending," the former employee added. "Signing a big deal with IPL brought visibility and users, but the strategy failed to convert this into sustainable growth. Instead, the company burned through funds at an unsustainable rate, leaving little room to manoeuvre when the market tightened."

Before Mukund Jha, Dalvir Suri, and Ankur Aggarwal left in 2024, Dunzo had already implemented widespread layoffs and salary reductions to manage its cash flow issues. These measures reflected the growing financial strain on the company and the limitations of its operational model. According to the former senior employee, the departing founders began pursuing other opportunities, recognising that Dunzo’s prospects were increasingly constrained.

The Broader Pattern: Industry Wars with Few Survivors

Dunzo’s decline and eventual shutdown are emblematic of a larger trend across multiple sectors in India, where hyper-competitive markets and unsustainable growth models have claimed several casualties. The quick-commerce sector’s struggles echo the turbulence seen in edtech, ride-hailing, and food delivery industries.

The post-COVID boom in edtech saw over $35 billion invested in Indian startups between 2020 and 2022, but unsustainable customer acquisition costs and a return to offline education burst the bubble. Edtech giants like Byju’s and Unacademy faced mounting losses, layoffs, and subsidiary closures. Similarly, India’s ride-hailing wars of the 2010s—dominated by Ola, Uber, and TaxiForSure—saw profitability elude even market leaders as heavy cash burns prevailed.

Food delivery faced its reckoning as well with startups like Foodpanda and TinyOwl vanishing, leaving Zomato and Swiggy to dominate in a duopoly under significant financial strain. Grocery delivery—with Grofers’ rebranding to Blinkit and the collapse of PepperTap—also highlighted the logistical and financial challenges in scaling sustainably.

Dunzo’s collapse is yet another cautionary tale for industries driven by subsidies and investor capital. Sustainable growth, operational efficiency, and profitability must take precedence, as history shows that breakneck expansion often leads to casualties, even among the most promising players.