India's Daalchini raises $4M to make smart stores and vending machines ubiquitous

Retail tech startup Daalchini, which offers smart vending machines to hundreds of brands in India, has raised $4 million as it works to establish autonomous smart stores and vending machines in every 200 meters of habitable area in the country.

The Noida-based startup provides a range of food and beverage options from over 160 brands through its smart vending machines. These brands include various D2C players such as Sleepy Owl, Slurrp Farm, Yogapulp and Yoga Bar as well as industry giants including Nestle, Mars and Dabur. The startup has also tied up with companies including Byju's, Reliance, Aditya Birla Group's Hindco, Vodafone, Samsung and EY and organizations including the country's public policy think tank NITI Aayog to deploy its vending machines.

Founded in 2017 by former Paytm employees Prerna Kalra and Vidya Bhushan, Daalchini runs a network of more than 850 stores across 11 states and 23 cities. It plans to expand to over 50 cities and grow from over 850 to more than 5,000 smart and autonomous retail points in the next 12–18 months.

Daalchini, Hindi word for cinnamon, offers a retail-as-a-service platform that provides real-time insights from offline sales. The startup says its unique vending machine ecosystem enables brands and entrepreneurs to reach their customers all over the country in a week's time.

Kalra, the co-founder and CEO of Daalchini, told TechCrunch in an interview that Daalchini wants to close the existing gaps in the Indian retail sector by using its technology and enabling people to expand their distribution offline. She said that unlike markets including Japan and the U.S. where one autonomous store is available for every 200 people, penetration of smart stores in India was less than 10,000 such stores.

Alongside enabling brands to sell their products through its smart vending solutions, Daalchini operates a franchise model to let people generate income by setting up their own smart vending machines and building smart stores in their preferred locations.

The startup already has over 200 franchisee partners with over 800 vending machines. About 30% of the total franchisee partners comprise woman entrepreneurs, she said.

Its franchise partners own over 98% of all its vending machines, she said.

Traditionally, vending machines are used for items such as chips, candies, cookies and cup noodles. Daalchini's tech, however, enables its connected machines to supply a range of different products — including even cooked food such as popular Indian cuisine Rajma Chawal (rice with red kidney beans).

"Both perishable and nonperishable items can be dispensed through our smart retail outlets," Kalra said. "This increases the use cases for smart retail and creates more and better business opportunities for partners who join us as a franchise."

The Series A round, which includes asset financing for over $876,200, was led by Mumbai-based early-stage investment firm Unicorn India Ventures. It also saw participation from existing investors such as Artha Venture Fund; Ajay Kaul, former CEO of Dominos India, and VSS Investco, the investment vertical of Vijay Shekhar Sharma, founder and CEO of Indian fintech Paytm. Before the latest funding, Daalchini had raised over $926,000.

Kalra said that most of the fresh funds would be used in R&D to enhance the product to expand use cases, including selling hygiene and personal care products. The startup also sees the mobility sector as the next area to look at and bring its small-size vending machines on buses, cabs and trains.

The startup generated over $1.5 million in revenue in the financial year 2022 and aims to grow to over $6 million with a gross merchandise value of over $16 million in 12 months. The startup currently has over 40 people in its team and is hiring across sectors.

"The retail-tech segment of India is going through a massive transition from its traditional physical store form to a digital one, the speed of which has been intensified by the pandemic. In this phase, Daalchini represents the best of both worlds with a ubiquitous physical presence backed by a strong technological framework that prioritizes its customers’ needs and convenience," said Ruchi Pincha, Investment Associate, Unicorn India Ventures, in a prepared statement.