Zomato looks to buy Runnr in a $20 million deal

Zomato, the food technology startup, is in early discussions to acquire delivery startup Runnr in a $20 million all stock deal. The startup is inclined toward buying Runnr in a bid to strengthen its food delivery business, and expand its offerings inorganically. Although Zomato started food delivery services in May’15, it hasn’t created its own dedicated logistics unit, and instead works with third-party delivery partners such as Runnr and Grab to fulfil deliveries. It had also invested some capital in Grab in 2015 for a minority stake.

The food technology startup is trying to increase its market share in the fiercely competitive food delivery industry having other major players including Swiggy and Foodpanda. Zomato had gone through a rough patch last year as major brokerage houses reduced its valuation by ~50% to $500 million. However, the startup has improved its financial position after that, and had reduced its monthly cash burn globally to ~$250,000 in the first half of 2017 as against $4.2 million in March 2016.

Although Zomato is looking to boost up its business by inorganic ways and thus is planning to go ahead with the deal, Runnr, on the other hand, is in a financially precarious position. As per an analyst, Runnr has significantly reduced cash burn to $300,000-500,000 per month, but they have less than six months’ cash left. The current market scenario is grim and it may be difficult to raise more, and thus its best for the firm to fold into the arms of a bigger rival.