From Unicorn to Stalled Growth - Meat Startup Licious Loses Flavor?

Remember the heady days of 2022? Indian startups were raising mega-rounds, valuations were soaring, and every other week a new unicorn was being minted. Licious, the online meat delivery platform, was riding high on this wave, bagging a whopping $150 million in its Series G funding round and boasting a valuation of $1.48 billion.

Fast forward to today, and the picture looks rather different. Licious, once a poster child for India's booming startup ecosystem, seems to be grappling with a growth slowdown. Its revenue has stagnated, and the path to profitability remains uncertain. What went wrong? Did Licious bite off more than it could chew? TICE presents you a detailed analysis of why Licious is going through a turbulant times.

The Growth Story Hits a Snag

Licious's initial trajectory was nothing short of impressive. From FY21 to FY22, its revenue surged by 59%, reaching Rs 683 crore. While not the explosive growth typical of early-stage startups, it was respectable for a company of its size. The Series G funding was expected to fuel further expansion and propel Licious towards its ambitious goal of Rs 1,500 crore in revenue by FY23.

However, reality fell far short of expectations. FY23 saw a meager 10% growth, with revenue reaching Rs 747 crore. To add to the woes, losses mounted to Rs 500 crore. But the real shocker came in FY24, when revenue actually declined by 9% to Rs 685 crore, effectively wiping out the gains of the previous year.

Shifting Gears: Profitability Over Growth?

The decline in revenue can be attributed to Licious's strategic decision to shut down some of its sales channels, including partnerships with Dunzo and Swiggy Meatsore. This move signals a shift in focus from aggressive growth to achieving profitability.

Why the sudden change in strategy? Several factors could be at play:

• Overestimation of the market: Licious may have overestimated the total addressable market (TAM) for online meat delivery in India. While the concept has gained traction in urban areas, expanding to smaller cities and towns may have proved more challenging than anticipated.
• Limited product-market fit beyond Tier 1 cities: The preferences and consumption habits of consumers in Tier 2 and Tier 3 cities might differ significantly from those in metropolitan areas, making it difficult for Licious to replicate its success.
• Intensifying competition: The online meat delivery space is becoming increasingly crowded, with new players like Zepto's Relish entering the fray and established companies like FreshToHome vying for market share.

The Road Ahead for Licious: IPO and Investor Returns

Licious is reportedly aiming for profitability in the next 2-3 years. Even if it achieves this goal with an annual revenue of Rs 800-850 crore ($90-100 million), the question remains: what kind of valuation can it expect in an IPO?

Using Zomato's current Price/Sales multiple of 17.5 as a benchmark (though arguably inflated), Licious might achieve a valuation of $1.5-$1.7 billion in a best-case scenario. This raises concerns for investors who poured in money at a $1.5 billion valuation in the Series G round. Will they see any significant returns? The answer, unfortunately, seems to be no.

The Licious story serves as a cautionary tale for India's startup ecosystem. It highlights the challenges of sustaining high growth rates, the importance of accurately assessing market potential, and the need for a clear path to profitability. Whether Licious can overcome these hurdles and regain its momentum remains to be seen.

Note: The analysis is written based on the expert insights from the LinkedIn wall of Pushkar Singh, Co-Founder, Termis Capital.

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