[The F word] Hyperlocal subscription startup DailyNinja raises $3M funding

With the new fund raise, microdelivery startup DailyNinja intends to expand its business across Bengaluru, Hyderabad, Chennai, and Gurgaon, and upgrade customer experience.

Bengaluru-based hyperlocal delivery subscription startup DailyNinja has raised $3 million in funding led by Saama Capital and existing investor Sequoia Capital. The team had raised $1.5 million in October last year, led by Sequoia capital. With this round, the total fund raise is at $4.5 million. 

The startup will use the current fund raiseto strengthen its operations in Bengaluru and Hyderabad, and expand to Chennai. It also intends to expand its business by acquiring more customers in Gurgaon. The funds will also be used to upgrade customer experience by adding more offerings.

DailyNinja had previously raised funds from well-known angel investors Kunal Shah and Sandeep Tandon of Freecharge, Aprameya Radhakrishna of TaxiForSure, Anupam Mittal of Shaadi.com, and others.

Getting started

Founded by BITS Pilani alumni, Sagar Yarnalkar and Anurag Gupta, the idea of DailyNinja came up because the duo personally faced problems managing groceries for their kitchen.  Even after using the services of all available e-grocers, they still found themselves running to the local kirana shop even in the middle of the night to pick up a few items.

“A lot of people typically order in the evening or night when they get back home and would like to get things delivered the next morning without any hassle. This led to the concept of DailyNinja,” Anurag explains.

The DailyNinja app allows one to order milk and groceries. Customers can place orders till 11pm in the night and the order is delivered at their doorstep by 7am the next day along with milk.  Customers can subscribe to daily milk delivery through DailyNinja, and top up their cart with everyday household needs like groceries, which are also delivered along with milk. 

DailyNinja claims to deliver to close to 25,000 households everyday, clocking over 7.5 lakh orders every month. It works through a prepaid wallet, where customers have to make sure they have enough money in the wallet to ensure they can order for the next day. Customers are now used to this process and maintain an average wallet balance of Rs 600 with DailyNinja, recharging twice a month on an average.

“DailyNinja’s business model latches onto the Indian habit of purchasing fresh milk every day. Once this is moved online, the high engagement generated by this habit makes it is easy for the company to deliver groceries, home services and medicines to the customer to help them manage their household in an efficient manner,” Anurag says. 

Building the business

“When we started off, the idea was to use milk as a Trojan horse and then sell more to every household, and we wanted to do the deliveries ourselves. In the initial days when it was hard for us to hire and retain delivery boys to deliver milk at 4am, we would join the delivery team and deliver to certain apartments ourselves,” Anurag says. 

During one of their deliveries, they came across a milk vendor who was delivering milk three times faster. The duo approached him and proposed he could take over all the deliveries and also get his 250 customers on the app if he partnered with them. They would, in turn, help him collect money from his customers online. 

“It was our eureka moment when we figured that if we could solve the problems of existing milk vendors, we could could tap the 60 million households in India who consume milk every day,” Anurag explains. 

Market challenges

However the business came with its own challenges. The hyperlocal delivery sector has seen its fair share of ups and downs in the startup ecosystem. The challenge, Sagar adds, is to manage the supply chain well while you scale and make sure deliveries are on time every day. 

The team’s approach has been to use the existing network of milk vendors and upgrading milk vendors as DailyNinja vendors. This enables the company to scale while making sure customers are satisfied.

“This round will help us achieve our objective of reaching 100,000 deliveries a day over the next 12 months. Our focus will continue to be on scale while ensuring better experience for our customers, we plan to bring DailyNinja to Hyderabad and Gurgaon soon,” adds Anurag. 

DailyNinja is now a team of 80 across sales, technology, product and management. The team claims to have a current annual turnover of Rs 60 crore. 

“The DailyNinja team has executed well to build an efficient at-home distribution model that we believe has broad applicability. Sequoia India is excited to continue to partner with them and help them build a much bigger footprint over the coming years,” Shailesh Lakhani, Partner at Sequoia Capital says.

Staying ahead

Sagar says that DailyNinja operates on positive unit economics. He says the margins recovered on the sale of non-milk products (groceries) are enough to cover the delivery incentives they pay to their partners. "Our basket is dominated by perishables which has high margins. Our blended margins are about 8-10 percent,” he explains. 

While Sagar acknowledges that the sector has competitors across the country that have their own delivery fleet, the DailyNinja approach of using a frictionless approach and partnering with milk vendors has scaled the fastest. 

“Our major competitors started out at the same time (late 2015) as us and DailyNinja has scaled the fastest by a considerable margin. This key differentiation in our model has made sure we are larger than all our competitors combined,” he says.

The team adds that 80 percent of the residents of a housing community started ordering from DailyNinja everyday within two-three months of starting operations.

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