 "Roadrunnr founders Mohit Kumar (left) & Arpit Dave have so far raised around Rs 73 crore and are likely to raise a much-larger Series-B round")
Nagarjuna, a popular chain of restaurants here, has shut down its in-house food delivery service. It has, instead, opted to use Roadrunnr for getting hot meals to its customers.
This is one of many restaurants and small businesses that find it too expensive to hire a full-time delivery staff. Roadrunnr is a hyperlocal logistics start-up that enables last-mile delivery of packages, serving small businesses such as restaurants, florists or laundry services, as well as larger e-commerce entities such as Flipkart and Snapdeal. Merchants pay Roadrunnr Rs 40 for a regular delivery and Rs 55 for a premium delivery up to 4.5 km, beyond which the company charges Rs 10 a km.
Founded by former Flipkart employees Mohit Kumar and Arpit Dave, the company has so far raised close to $11 million (Rs 73 crore) in seed funding in April and Series-A funding in July. And, is likely to raise a much larger Series-B round.
At the beginning
Delivering packages to customer doorsteps is a very labour-intensive process but, from the start, the Roadrunnr founders knew technology was key to solving the issue. While employing a workforce of delivery agents was inevitable, the duo looked to eliminate all support staff.
"You either have to have a workforce that manages the workforce or you can build technology to handle such scenarios. In our case we've built technology to handle this," said Mohit Kumar, co-founder and chief executive officer.
Back in September 2014 when Mohit met early stage investor Adit Parekh of Blume Ventures, he was thinking of ways to disrupt the B2C (business to consumer) delivery space. Growth of the online food ordering space was phenomenal and aggregators such as TinyOwl, FoodPanda and Zomato were struggling to fulfil deliveries.
As the idea matured, it turned into a B2B (business to business) operation that would aid online food ordering platforms and small restaurants. However, there was a problem. Food deliveries typically come only during the afternoon and late evening, which meant Roadrunnr's delivery staff was underutilised most of the time. This pushed the company to begin servicing other businesses and, eventually, e-commerce players.
While B2B meant the company didn't have to blow huge amounts of money in acquiring customers, it did mean funding was harder to come by. "People never used to understand our business model," says Mohit. It wasn't until the duo met Sameer Brij Varma that their fortunes turned.
"When we started talking to these guys, what struck me was their approach in depth of thinking...in terms of what the problem areas were, how these could be solved and their ability to solve it using more technology and compute power versus just throwing more bodies at it," said Varma.
By June, the company had raised a further $10 million in Series-A funding, led by Sequoia Capital with participation of existing investors. A much larger Series-B is in the works, with estimates suggesting it could be as high as $40 mn (Rs 260 crore).
Online food ordering rides on a backbone of being able to deliver meals to people in a few minutes. Therefore, as demand increases, so does business for services such as Roadrunnr. However, food ordering makes up only a small percentage of its transactions. E-commerce deliveries have taken the lead. E-commerce is half of all transactions for Roadrunnnr and the share is expected to go up. As more people shop online, getting packages to customers on time is getting harder for companies such as Snapdeal and Flipkart. While they are investing heavily on setting up warehouses, demand is fast outpacing their growth.
When it comes to revenue, Roadrunnr declines to give any figures. "We are at least eight times larger than the second player in terms of deliveries. We're at least 16 times larger than the second player in terms of revenue because we charge the highest," said Mohit.
Going forward
So far, Roadrunnr has remained asset-light, using a very skeletal model for running its operations. The company's Pune operations have a single manager, who handles 50 or so delivery agents.
That will change. As e-commerce deliveries get more plentiful, the company is planning to set up hubs and sort facilities to manage intra-city deliveries. "We started with a very extreme opinion that we'll not have hubs at all but we're now contemplating whether we can take a hybrid approach," said Mohit.
While the move will be capital-intensive, the gains will be much higher. Roadrunnr has also begun testing ways to aid e-commerce companies handle product returns. While food deliveries and serving other small businesses will stay, e-commerce seems to be powering a big part of Roadrunnr's growth.
Mohit saw for himself the success of the freelance at his stint with Ola, during which the company grew from registering 500 transactions a day to 50,000 a day. He's taking similar steps to help grow Roadrunnr, which not only hires delivery agents with their own motorcycles on a freelance basis, but also cyclists and walkers. The company now functions in 11 cities, says it has 4,600 delivery agents and records an average of 23,000 transactions a day. It's also running experiments in 20 other cities it has identified for entry next.
FACT BOX
Company: Roadrunnr
Area of business: Hyperlocal logistics start-up
Funding: Raised $11 million in two rounds
Number of transactions: 23,000 a day
Business type: Business-to-business
EXPERT TAKE: Sridhar Gundaiah
Roadrunnr has built a great model, considering how unorganised the whole hyperlocal last mile delivery market is. What they're doing is the need of the hour.
Delivery is a problematic thing, especially in the last mile, because of (staffer) attrition, which stands at about 80 per cent in large cities like Bengaluru. The problem is that it's not a very specific kind of job to do. In comparison, a driver of, say, Uber or Ola owns a car and that becomes his livelihood. But, for a lot of delivery boys, it is sort of a part-time job or they're not very serious about it.
Still, they have to explore different models. I'm not sure this is the model Roadrunnr will stick onto. Last mile in India shouldn't be only about having a fleet of delivery boys. It is not a scalable model because you have to invest in salaries and training.
You can probably have 40,000 delivery guys - feet on the street - but if you look at the sheer scale of e-commerce in the next five years, assuming 10 per cent of India's retail happens online, such models might not suffice.
I personally see three-four logistics companies becoming more valuable than the e-commerce companies. Because that's the most important bits of e-commerce - the physical gratification.
It's still the tip of the iceberg. People have not seen the potential of India's e-commerce. If I look at Roadrunnr's model, it's a great one - You first try to conquer and get a handle on the low-hanging fruit, with local delivery guys but, fundamentally, their model will have to evolve.
(Sridhar Gundaiah, chief executive of StoreKing, a hybrid retail concept)
