Grofers Acquires Townrush

Hyperlocal delivery startup Grofers has bought business-to-business logistics service provider Townrush, closing its second acquisition within a week. Earlier this week, Gurgaon based Grofers had acquired SpoonJoy. Both acquisitions are essentially acqui-hires where a company is bought for the team instead of its existing business.

Founded in May this year, Townrush had raised an undisclosed amount in a seed round from Lightspeed Venture Partners. Grofers is one of the most well capitalized start-ups in the Hyperlocal delivery segment, having raised $45 Million from Sequoia Capital and Tiger Global Management. Grofers is making these acquisitions primarily for the teams with no significant cash or equity being exchanged.

Townrush closed down in six months. The company used to compete with Roadrunnr, Parcelled, Shadowfax, and Grab, among others. At least 20 such start-ups have emerged in the last 10 months, making it an overcrowded space. However, only Roadrunnr and Shadowfax have raised any significant capital, mopping up $11 Million and $8.5 Million.

Hyperlocal delivery saw a huge amount of ventures spring up this year but many have found it difficult to raise follow on capital. The unit economics in the delivery business is a big challenge. In 2015, as many as 290 startups received seed funding, up almost 90% from last year, but follow on rounds have been muted despite the glut in initial rounds.