Quick commerce startup Dunzo is reportedly preparing for a new round of layoffs this week. According to sources familiar with the matter, the startup’s co-founder and chief technology officer (CTO), Mukund Jha, informed employees about the decision during a meeting on July 19.
Size and Impact of Layoffs
Jha stated, “We are definitely considering layoffs and the size will be decided either tomorrow (July 20) or (the) day after (July 21). Within this week we will communicate (the size of layoffs) to employees.” The upcoming layoff is anticipated to affect at least 20% of Dunzo’s workforce, which amounts to nearly 200 employees. This marks the third round of retrenchments at the company.
Salary Deferral and Cash Flow Issues
Before the news of potential layoffs, Dunzo informed its employees that they would defer their June salaries until September. The company assured that they would credit the salaries for July and August on September 4. Dunzo had previously committed to crediting the salaries by July 20 but was unable to meet the deadline due to cash flow challenges.
Dunzo Financial Situation and Measures to Cut Costs
Facing a cash crunch, Dunzo had to cap the salaries of many employees at a flat INR 75,000 in June. Despite having $40 million in the bank and 18 months of runway remaining, the startup is unable to access those funds due to debt obligations.
In response to rising costs and losses, Dunzo has undertaken various cost-cutting measures, including shutting down over 50% of its dark stores, exiting unprofitable markets, increasing delivery fees, and implementing convenience fees for customers.
Dunzo Funding and Pivots
Founded in 2015, Dunzo operates a hyperlocal delivery platform and has raised $500 million from investors such as Reliance, Google, Lightrock, Lightbox, and Blume Ventures. In January, the startup aimed to raise $100 million but could only secure a $75 million fundraise from Reliance and Google via convertible notes by April.
The company faced heavy losses and a high burn rate, impacting its bottom line. In April, it laid off over 300 employees to rationalize costs and has been planning to pivot from a dark store model to onboard larger supermarkets and grocery stores on a revenue-sharing basis. As Dunzo navigates through challenging times, its ability to weather the ongoing headwinds remains uncertain.
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