Dunzo fails to pay staff: Why the start-up is struggling
What's the story
Hyperlocal delivery start-up Dunzo counts heavyweights such as Google and Reliance, among others, as its backers. The company, however, is struggling to pay the salary of its employees.
Dunzo has informed staffers that it has deferred their July salaries to September. The company has also delayed the balance payout of the June salary of some senior employees.
Let's see why Dunzo is struggling.
Context
Why does this story matter?
Dunzo has been struggling over the past few months as the hype surrounding quick commerce has died down. Swiggy's Instamart and Zomato's Blinkit are going through similar problems.
The start-up funding crunch hasn't helped Dunzo's case. The company has not managed to raise as much as it wanted.
In April, the firm laid off 300 employees.
Salary deferred
Employees will get their salaries on September 4
Dunzo first deferred the June salary of employees who earned more than Rs. 75,000. The company had set a deadline of July 20 to make the balance payment. Now, they will have to wait till September 4.
"Additionally, the July salary for all team members will be paid only on September 4th along with the August salary," the company said in an e-mail.
Funds
Dunzo only managed to raise $45 million in latest funding
Dunzo has been looking for a large funding round for a while. The company's aim was to get at least $150 million.
However, it could only raise about $45 million through convertible notes in April. Only Google and Reliance subscribed to the notes.
Meanwhile, other shareholders, including Lightbox and Blume Ventures, stayed away. They want the company to be more stable.
Business contraction
The firm has shut down most of its 'dark stores'
The company's cash flow has reduced steadily. This has affected the business.
Dunzo has closed most of its dark stores (warehouses where the firm stores its inventory). Half of them were shut down before the April funding.
Now, 70% of them are estimated to be gone. Dunzo has been shifting its focus to B2B, as it won't need as much capital as Dunzo Daily.
Reliance
Dunzo is in talks with Reliance for more funds
Dunzo has been in talks with Reliance to raise funds. The company wants around $20 million in additional funds.
It is unclear whether Reliance has shown interest in this. If Reliance agrees, its shareholding in Dunzo will increase.
Reliance currently holds 25.6% of Dunzo, while Google's shareholding in the company is just below 20%.
Dunzo has raised $467 million so far.