Hiring top talent, accountability, customer obsession: Swiggy execs give IPO mantra

Over the past few weeks, the startup ecosystem has been debating whether companies should be run in "founder mode" or "manager mode" when scaling.

In founder mode, a founder remains closely involved in decision-making and maintains a direct relationship with employees. On the other hand, venture capitalists often encourage startups to operate in manager mode, where founders hire senior managers to lead and scale the company.

Swiggy appears to have embraced the manager mode, with Co-founder and Chief Growth Officer Phani Kishan Addepalli praising CEO Sriharsha Majety for bringing top talent from the industry to lead various functions at the company.

"You want to make people feel confident," he said, adding that a company should give young talent the mandate and the confidence to get things done, as well as giving them some room to fail. “Of course, people are going to make mistakes, but when they do is it about chiding them or is it about why and avoiding that mistake going forward?”

Swiggy Food Marketplaces CEO Rohit Kapoor said, "The beautiful part is that 90% of the organisation will believe that they're fully empowered to do what they have to do."

Addepalli and Kapoor were speaking at YourStory’s flagship startup-tech summit TechSparks 2024 in Bengaluru—a day after the company published its draft red herring prospectus.

Swiggy plans to raise a mammoth Rs 10,000 crore from the market, giving exit to some big investors like Prosus and Elevation Capital, among others. Bollywood actors like Amitabh Bachchan and Madhuri Dixit also recently became shareholders of the company ahead of the IPO.

Of the targeted raise, Rs 3,750 crore would be through a fresh issue of shares. Most of the proceeds would be used to establish more dark stores for its quick commerce business, Instamart, which is the second-largest player in a sector that has emerged as a disruptive force in Indian retail. 

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The idea behind Swiggy Instamart

Talking about the genesis of quick commerce, Addepalli said that the founders never thought that the business would take off in such a big way. He said that while Swiggy started as a city-based logistics service in the middle of the last decade, it quickly pivoted to food delivery with the idea of building a “Dominos-layer” on top of all restaurants, referring to the US-based pizza chain known for its fast delivery.

“Then, it slowly moved into a place where we thought we could build a layer of Swiggy over every grocery store. That was the genesis of quick commerce,” said Addepalli. “I don't think we ever expected how large quick commerce would get. Seldom do we know how these things play out.”

But what really helped quick commerce takeoff was the tailwinds from the COVID-19 pandemic in 2020, which was when Swiggy was piloting an early version of Instamart, called Swiggy Stores.

“Overnight our business fell 78% and there was a lot of speculation whether it was an essential service or not an essential service, consumers were very sceptical about bringing external stuff into their doorstep,” he said. “We pivoted to things like giving customers confidence in restaurant audits, but at the same time, we had this sudden spark that grocery demand would pick up. Then we knew we were onto something.”

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Profitable food delivery business

Meanwhile, Swiggy has improved upon the profitability of its core food delivery business. It reported a positive adjusted EBITDA of Rs 57 crore in the June 2024 quarter. Kapoor said that the company strengthened a lot of its “weak muscles” by establishing clear accountability in every part of its profit and loss.

“Swiggy had turned profitable by driving 200 discrete projects ranging from 5 paisa to 50 paisa value,” he said. “We have chiselled business down where each leader understands growth and profitability.”

Kapoor, who joined the company two years back from franchised hotel chain OYO, added that the company has been onboarding 60,000 gig workers a week, making it one of the biggest employers in the country. 

Commenting on the competitive quick commerce space, Kapoor used a football analogy, stating that the sector is currently playing in the “first five minutes” of the game. He added that consolidation, similar to what happened in the food delivery market, is inevitable in quick commerce.

“There were nine food delivery companies nine years ago. There were three in Bengaluru last year, including one MNC giant,” he noted. Ecommerce giant Amazon wound down its food delivery business completely in 2023 after it stopped taking orders at the end of 2022. 

“It [the number of players] changes over time. What has stood the test of time is not obsessing over the competition but obsessing about the consumer,” said Kapoor.

Swiggy’s DNA

Addepalli noted that Swiggy’s focus on customer obsession, even at the cost of taking a hit to the business, has been a defining factor in its growth and eventual path to a public listing.

“For a very early stage startup, where the majority of the startups die, it was quite a defining moment for us that we care about customers, that rather we do not take business than do a bad job,” he said referring to the company’s decision in its early days to pause its service entirely when customers started facing issues on delivery updates.

“If I have to pin it down to one core thing it would definitely be 'putting your hand where your mouth is'. We actually followed through on that customer obsession time and again, which hopefully got us a seat into maybe going for an IPO,” he said.