The quick commerce startup Dunzo is in the process of obtaining the board’s approval for a potential $35 million fundraising effort. However, there is a difference of opinion among some of its investors regarding the company’s valuation for this crucial funding round. These investors believe that the struggling startup should consider a valuation of approximately $200 million, which is just one-fourth of its peak valuation of $800 million, according to individuals familiar with the situation.

Some of the current investors have already pledged approximately $10-15 million in capital at the lowered valuation. However, the company’s board has not yet given its approval for this proposal, according to sources. Furthermore, a meeting that was originally scheduled for last week is now anticipated to occur later this week. In the upcoming days, Kabeer Biswas, the founder and CEO of the company, is expected to seek approval from the board, which includes major shareholders like Reliance Retail and Google, to secure the essential funding, as per the sources.

“The current commitment is at around a $200 million valuation. That’s also the blended average for most investors in the firm before it was valued at close to $800 million,” according to one investor privy to the discussions.

“This money is also committed to the fact that it (Dunzo) will become a B2B company for all practical purposes doing delivery for business customers,” the person said, while adding that “everyone putting in the capital needs to agree on the new valuation.”

In an effort to preserve cash amid its ongoing crisis, the struggling startup company has significantly downsized its quick commerce operations in the past year. As part of this strategy, it has transitioned away from running its own dark stores and now provides its services through third-party grocery stores.

According to various sources, the outlook for its consumer business appears extremely grim, and recent discussions have centered on the possibility of entirely discontinuing it.

“The company has proposed 70-80% of business to come via Dunzo Merchant Services but it could be the only remaining business. Dunzo internally sees it as delivery as well, except it is for a B2B client like JioMart and others,” this person said.

According to reports, Reliance Retail, which owns a 26% stake in the firm, was reportedly opposed to a significant reduction in valuation. This stance was influenced by Reliance Retail’s substantial investment of $200 million in Dunzo during a funding round that amounted to $240 million in January 2021.

Meanwhile, it’s worth noting that Dunzo has received an advanced-stage proposal related to its dark store traffic data and ONDC business, according to multiple sources familiar with the matter. However, these sources added that the founder and the board are unlikely to show interest in this proposal.

Dunzo refrained from providing a comment on the matter. An email inquiry directed to Reliance Retail did not yield any response at the time of press.

These developments coincide with recent company filings that disclosed the departure of approximately five board members within the last two months.

Ashwin Khasgiwala, who serves as the Group Chief of Business Operations at Reliance Retail, and Rajendra Kamath, the Finance Head at Reliance Retail, stepped down from the Dunzo board on August 3. Vaidhehi Ravindran, a partner at Lightrock India, resigned from the board on August 21. Furthermore, on August 29, one of the co-founders, Dalvir Suri, also departed from the board.

On October 2, Snackfax reported on Dalvir Suri’s full departure from Dunzo.

Read More: Dunzo Co-Founder Dalvir Suri announces departure after six years of service

Mukund Jha, one of the Co-Founders and the Chief Technology Officer at Dunzo, has also stepped down from the board; however, he remains associated with the company. He has expressed his intention to eventually exit in a few months. It’s worth noting that both Jha and Suri had minimal equity in the company, which had been diluted in the last funding round. The other co-founder at the firm is Ankur Agarwal.

“Mukund (Jha) remains an integral part of Dunzo’s leadership team. While we are restructuring the org with new leaders driving key mandates, Mukund will continue to be an important part of the strategic leadership team guiding and directing Dunzo’s future roadmap,” a spokesperson for Dunzo said on Jha’s role at the company.

Read More: Dunzo’s leadership exodus continues: Co-Founder Mukund Jha steps down

The departures from the board were initially reported by the online publication, The Morning Context.

Two informed sources familiar with the situation at Dunzo have indicated that one of the reasons for the board members’ departures is the legal notices that Dunzo has received over the past few months. These legal notices potentially add further liability to the company’s directors in the event of lawsuits or conflicts with vendors.

Dunzo has not yet disbursed a portion of employee salaries for June and the complete salaries for July. The company has communicated to its employees that these outstanding payments are anticipated to be settled in January-February of 2024, with the notification provided on September 25.

The recent workforce reductions have been targeted at reducing the headcount to 200 employees.

“They (Dunzo) have estimated moving to a new office, which will mean rents will come down to about INR 4 lakh a month from INR 20 lakh,” one of the people said.

Dunzo utilized the payroll financing application OneTap to disburse the salaries for the month of August to its employees. Prior to this, the company had received legal notices from vendors such as Google India, Facebook India, Koo, and Glance, citing unpaid dues exceeding INR 11.4 crore.