Is it Sustainable?
The platforms pay workers a fixed compensation regardless of the number of jobs assigned through the app.
“What started as a 15- or 20-minute service (for instant bookings) is now following the playbook of instant grocery delivery, with workers being dispatched even before the scheduled booking time,” an executive at one of the platforms said. “Timelines have been reduced to as low as 7-8 minutes, and these are being highlighted on the booking page as key differentiators.”
The person, talking on the condition of anonymity, agreed this might not be sustainable in the long run, “but for now this is how customer acquisition is being driven, especially in high-demand markets such as Delhi-NCR and Bengaluru.”
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Listed firm Urban Company, in its April-June earnings, reported widening losses from InstaHelp but said it remains focused on gaining market share. “In this phase of category development, we are prioritising market leadership over everything else,” the company said in its shareholder letter on July 31.The sector’s rising cash burn, coupled with the relatively limited size of the addressable market, is beginning to concern investors tracking the space. The category is economically viable primarily in urban catchments, where high order density supports efficient fulfilment and worker utilisation. Expanding into lower-density neighbourhoods is significantly more challenging, another industry executive said.
ET reported last month that InstaHelp, Snabbit and Pronto together burned $16-17 million in June, about 14% more than the previous month. Industry executives said the figure is estimated to have risen further in July.
The expansion is being bankrolled by venture capital.
Snabbit has raised $112 million from investors including Susquehanna Venture Capital, Unicorn Growth Fund, Bertelsmann India Investments and Lightspeed Venture Partners. Its latest funding round in March valued the startup at $350 million, nearly double its $180 million valuation in October.
Pronto has raised about $58 million from Epiq Capital, General Catalyst, Bain Capital Ventures and tech investor Lachy Groom. Its latest round in May doubled its valuation to $200 million from $100 million in March. “Our sense is that…capital markets, especially on the private side, will go beyond narrative to look at the actual health of the business, the size of the prize and what this can become,” Urban Company cofounder and CEO Abhiraj Singh Bhal said during the company’s earnings call on July 31. “We want to make sure we continue to sustain the pressure on our private friends, maintain our leadership and increase our market share.”