India’s home grown cab hailing company Ola is currently on a fundraising blitz. Barely a month after raising $50 Mn from two Chinese investors, reports are now claiming that the cab hailing major is finalizing $100 Mn fundraising deal with Steadview. Ola had already raised $1.1 Bn last year at a valuation of nearly $4 Bn.
But why am I really getting fizzy about cab hailing major’s insistable appetite for funds. I mean commonsense clearly dictates that high profile startups are always in need for more funds for expansion.
While I don’t really intend to defy the commonsense here, Ola’s latest fundraising adventure calls for little bit of deep analysis. This is because this is the classic case of more than meets the eye.
Ola’s insistable hunger for funds is partly driven by sneaking acknowledgement that demand in the domestic market has become too stagnant. Although Ola and its main rival Uber may not admit openly, industry sources claim that both companies have been hit by saturated demand in the domestic indian market.
This is the sole reason for SoftBank backed startup to go for an aggressive international expansion. We now know that Ola has already started operations in Australia and is working towards to start operations in UK and NZ.
Investor pressure, of course, may have also propelled Ola to find sustainable solution to the problem of saturated demand in the domestic market. Conventionally, solution to this incurring problem could not have been found nowhere else but in the lucrative international markets.
And then there is also another factor that is fuelling Ola’s recent fundraising spree. Interestingly, this factor has nothing to do with Ola’s core business of cab hailing. It solely deals with Ola’s newly acquired business of Food delivery, FoodPanda.
Ola had bought FoodPanda in December last year, which became cab hailing major’s costliest acquisition till date. This acquisition could not have come at a right time as food tech sector had already been through consolidation phase and was now seemingly poised for a solid growth.
FoodPanda is already in the process of massive expansion as it looks to capture the food delivery market. It recently expanded across 50 cities and also acquired defunct startup Holachef to consolidate its position in cloud kitchen.
It is clear that Ola wants to make FoodPanda its cash cow. Just like today TSC and Jaguar have become a cash cow for Tata Group. Okay, I may have certainly overstretched my comparison by comparing Ola with Tata, but the former’s intend to make FoodPanda into cash cow similar to TSC can neither be overruled.
However, Ola very well knows that it can’t make FoodPanda into a cash cow without massive investments. The cab hailing major is very well aware of the cut throat competition existing in the food delivery market. Not only it has to deal with competition from Uber’s UberEAT, but also from two big boys – Zomato and Swiggy.
Zomato and Swiggy are already miles ahead of the cab hailing companies in terms of market share. Not to mention they both have raised quite a few fundraising rounds this year in a bid to take more market share. This means that Ola has lot of catching up to do and it certainly can’t catch with the two incumbent players without making massive investments.