Exclusive: Fraazo shuts ops in multiple cities; in talks for acquisition

Trouble seems to be brewing in one of the companies in the quick delivery space. Fraazo, a fresh farm produce focused quick commerce startup is potentially staring at a complete shutdown as the company is only left with a few months of runway, said three people aware of the inner details of the company.

“Fraazo has shut down operations in all cities [excluding Mumbai],” said one of the sources cited above, requesting anonymity. “Even in its core market (Mumbai), the company has scaled down operations by 50-60%.”

Previously, the company was operational in seven cities including Delhi (NCR), Pune, Hyderabad and Bengaluru, but sources say “most of the local teams in these cities have been fired and dark stores have been shuttered.”

This development comes at a time when startups in India and globally are experiencing a funding crunch. This has led to several tech unicorns laying off employees and also shutting down loss-making verticals. Some like Alpha Wave-backed Udayy and Lido shuttered operations due to cash crunch and absence of right product market fit or PMF. Entrackr was the first to report the developments.

Recently, Fraazo was in the news for laying off around 150 employees and shutting down several dark stores.

Sources further said that for the time being Fraazo’s existing investor Westbridge has written a small cheque to keep them afloat. “All investors including Sixth Sense and Equanimity Investments have said no to follow-on investment and they unequivocally asked the company to figure out a merger and acquisition deal,” said another source aware of the board’s discussion, also requesting anonymity.

Detailed queries sent to Fraazo and Westbridge didn’t elicit any immediate response.

Fraazo is a full-stack online fresh vegetables and fruits ordering platform which handles the entire back-end supply chain and front-end operations. The company has raised over $65 million including a $50 million worth Series B round in October last year but sources indicate that only $30 million of the last round had hit its account.

Fraazo’s regulatory filings with the RoC also indicate that the company raised around Rs 210 crore or around $27 million in October last year. Last month, the company issued rights shares to its founders where they have committed to putting in Rs 200 crore. However, this is only an allotment not the actual money raised. Meanwhile, there are potential acquisition talks.

“Fraazo is talking to several large companies such as Swiggy, Flipkart and Zepto to get acquired. Even if acquisition talks materialize into a deal, it will likely be a distressed one,” said the source mentioned above.

Detailed queries sent to Flipkart, Swiggy and Zepto regarding these talks also didn’t elicit any immediate response.

The severe trouble at Fraazo is a reality check for the quick commerce space which has attracted hundreds of millions of dollars in the past year and a half. A year and a half old ten minute grocery delivery Zepto has cornered $361 million in total while Swiggy earmarked $700 million to scale up its grocery delivery vertical Swiggy Instamart in December last year. Zomato acquired BlinkIt for $568 million to ramp up its play in the quick commerce space in June.

“Quick commerce is a high burn game. Figuring out unit economics is very tough in the segment and only deep-pocketed players will last,” said the person quoted in the beginning of the story. “The space could see more consolidation in the next few quarters if the funding environment remains tough.”

Unlike Fraazo which quickly expanded to multiple cities, its direct competitor Otipy appears to be following a slow approach. The Gurugram-based fresh farm produce platform which leverages social commerce had raised a $32 million Series B round led by Westbridge and others. Westbridge is a common investor in both firms.