Swiggy, which recently launched Pyng, a platform that connects users with verified professional services such as health experts and event planners, may be wanting to diversify beyond food delivery and quick commerce, but experts warn that the services marketplace is a tough business to scale and turn profitable.
Out of the 8,859 startups operating in the professional services space that have collectively raised $2.72 billion, only a few such as Urban Company, NoBroker, Practo, LivSpace, Enrich and HomeLane, have managed to scale efficiently. Many players either specialise in offering blue-collar services or bundle them as add-on offerings, but sustainable success remains elusive for most.
The business model primarily involves connecting service providers with customers and earning revenue by taking a commission on each transaction or charging service professionals a monthly listing fee. Despite appearing straightforward, it comes with significant challenges, primarily high customer acquisition costs that can delay profitability. “Aggregating fragmented service providers, ensuring quality and reliability, and offering seamless customer experiences are key pillars. With the right tech backbone and operational efficiency, this model can scale. However, profitability is often delayed due to heavy onboarding, training, and marketing costs,” said Milan Sharma, director at 35 North Ventures.
The viability of the model is further under scrutiny because funding in the segment has slowed sharply. According to Tracxn data, total funding fell from $590.8 million in 2021 to $516.2 million in 2022, droping further to $128.6 million in 2023, and $147.4 million in 2024. So far this year, startups in the space have raised less than $16 million in funding. Experts say the dry spell may continue despite venture capitalists and private equity players holding significant dry powder.
Industry watchers also point out that Swiggy’s entry into the space comes at a time when the segment is extremely crowded and competitive, making long-term survival a formidable challenge. “While there has been interest from investors, profitability and unit economics of the business model, as well as differentiated offerings in terms of quality of services, are key for these startups to attract funding,” said Raja Lahiri, partner and technology industry leader at Grant Thornton Bharat. Given the high number of failures, venture capital funds are now more selective and cautious, often conducting deeper due diligence. According to Tracxn, there are 3,571 deadpooled companies in this space.
Brand loyalty is another major obstacle. Customers frequently shift between platforms in search of better deals, making it difficult for companies to build lasting relationships. Regulatory hurdles also add complexity. “Startups often get stuck in red tape or end up dealing with unexpected taxes or licence issues. This slows them down and makes it harder to grow,” said Somdutta Singh, founder and CEO of Assiduus Global and an investor at Karma Holdings.
Despite these challenges, the opportunity remains significant. The demand for recurring services such as home maintenance, health and wellness, and tutoring is rising, with India’s gig economy projected to reach a gross volume of $455 billion by 2025. “Startups that stay focused on building trust, solving real user problems, and scaling smartly are the ones that will thrive,” Singh said.
Companies like Urban Company and Topmate have been experimenting with offering services on-demand within 15 minutes, tapping into the quick-commerce model. However, analysts are skeptical about the sustainability and profitability of such offerings, which are still in the pilot phase.
For Swiggy, adding services is a natural extension of its convenience-led model and offers a pathway to increasing lifetime value per user. However, experts caution that success in this segment will require a phased, data-driven approach with sharp consumer insights.