India’s top food delivery startup accused of cheating. Swiggy returns fire, calls it a lie

Photo credit: gratisography.

This morning India’s leading food delivery startup Swiggy came under fire from an anonymous blog post accusing it of cheating restaurants, users, and investors.

The post, allegedly written by two of Swiggy’s sales people along with two former employees, called the company a “House of cards.” It went viral on social media and almost everyone in the Indian startup ecosystem has been going back and forth on it. Tech in Asia could neither verify the claims independently nor identify the bloggers.

Swiggy has just responded to the post in its own blog, rubbishing the accusations made against it. In a post written by CEO Sriharsha Majety, Swiggy hinted at foul play, saying that it has “good reason” to disbelieve that its former employees were behind the anonymous post and that it was “falsified with completely incorrect data and details.”

Before we get into the accusations and the counter-punches landed, a quick background on Swiggy and why this matters.

Swiggy bucked the trend.

One of the striking stories of last year was the death of several food delivery startups in India. Some starved due to a funding crunch, others due to poor unit economics. The failure of the well-funded TinyOwl was a stark example. The startup, which raised about US$28 million in total funding, couldn’t solve core problems of delivery costs, negative margins, and unreliable food quality from restaurants it aggregated. It finally shut down after a distress merger with logistics company Runnr.

Zupermeal, iTiffin, BiteClub, Zeppery, Rocket Internet’s Foodpanda, Dazo, and Eatlo are a few others in the food delivery business that shut down.

Swiggy bucked the trend. That’s partly thanks to its heavily-loaded investors, who didn’t let the funding pipe go dry. Founded in August 2014 – during the peak of a funding gluttony in India – the startup is backed by Accel Partners, Bessemer Venture Partners, and many other VCs, along with Naspers leading a US$80 million series E funding round. In total, Swiggy has raised US$155.5 million in equity funding.

At the time of its last funding round in May this year, Naspers head of investments in India Ashutosh Sharma said his firm was “attracted to the company’s [Swiggy’s] exceptional execution in disrupting online food ordering and delivery in India while many players are struggling.”

This is why the anonymous blog sent startuppers in India into a tizzy today.

See: 25 failed startups in India and what you can learn from them

The following are the main accusations in the anonymous blog and Swiggy’s response to each of them:

Investor deck fudged?

The blog says Swiggy lied to investors about order volumes during its last fund-raise. It accuses Swiggy of shaving the December orders-per-day number so that it could show a linear growth curve. An Excel sheet reproduced in the blog claims to have the real numbers, which show a dip in orders in January, compared to December.

Restaurant-owners arm-twisted?

Conflict of interest?