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Dunzo may get $30-35 million lifeline from Reliance, Google, others; more cost cuts on anvil across biz, ET Retail

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Dunzo, the troubled quick commerce startup backed by Reliance Retail, may be able to secure only $30-35 million in new funding, and that too, with strings attached, people aware of the matter said.

The funding will have onerous liquidity preference terms for existing investors, the people cited above said. Dunzo is expected to hold a board meeting at the end of this week to approve the funding plan.

Reliance Retail, which owns nearly 26% in Dunzo, along with Google, Lightrock and DS Group, are among the existing investors likely to participate in the funding round, the people said, asking not to be named.

To secure the much-needed cash, Dunzo has also proposed to halve its monthly burn rate to $300,000 and trim its headcount to just around 200, the people said. Until September, the company had a monthly burn of about $600,000 after at least three rounds of job cuts and scaling its business down in the past few months owing to a severe cash crunch.

“All the terms are part of the proposal to secure new funding. Paperwork has begun and the money is likely to come by the end of October-early November,” one of the persons cited above said. “The company has to cut costs further and fixed costs need to align with the new future of the company.”

Going forward, Dunzo will focus on its B2B vertical, Dunzo Merchant Services, which will account for 70-80% of its business, with the rest being consumer focused. Grocery delivery will happen only through third-party stores while it will continue pick-up-and-drop services.

Down round imminent

While the broad contours of the new financing haven’t been finalised, the extent of the hit Dunzo may have to take on its valuation is unclear. The people cited above said the company’s priority is to secure new cash to clear existing dues towards employees and vendors, and that the upcoming board meeting may offer more clarity on this issue.

ET reported on August 22 saying a disagreement among Dunzo shareholders on the extent of reduction in the startup’s valuation was delaying the closing of new financing for the startup.

Another round of job cuts

Even as Dunzo continues its fundraising efforts, it made fresh layoffs on Monday in what was the fourth round of job cuts since January. This is in line with the company’s plan to reduce fixed costs and cut the team size to 200 people. At the start of the year, Dunzo had more than 1,000 employees.

ET also reported on September 15 that Dunzo CEO Kabeer Biswas had indicated the company would go in for another round of job cuts. It isn’t clear how many people have been laid off in the latest cuts, but some teams have seen larger layoffs, the people added.

As part of the retrenchment exercise, employees have been given two options — the first being that they could immediately cease to work and receive pending salaries and other dues by January or February. The second option, one of the persons said, is to serve their notice periods and receive September salaries in the first week of October. But the final settlements and pending salaries from June and July would be paid only by January or February.

Dunzo will also shift to a new office to save on rentals. “They have been told to reduce fixed costs as much as possible. Now, there are less staffers, so the firm doesn’t need as big a space,” another person said.

  • Published On Sep 25, 2023 at 03:48 PM IST

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