Investors in Milkrun hunt for a buyer as the last local grocery delivery standing struggles in hunt for fresh cash

On Jan 27, 2023

Rapid grocery delivery service Milkrun tried to raise additional cash twice in 2022, despite starting the year with $75 million from Tiger Global in a Series A last January, but couldn’t attract investors amid the financial failure of its rivals.

The Australian reports that the Sydney startup touted its Series B pitch deck to potential backers claiming it would have $7 billion in total revenue by 2026, grabbing 20% of the country’s market share in grocery, meal kit and alcohol sectors. Milkrun also hopes to nab 5% of pet, baby, gift and pharmacy sales.

To put that figure in perspective, Australia’s 4th largest supermarket chain, IGA, founded in 1988, with more than 1,400 stores, generates around $14 billion in annual revenue. Milkrun currently operates in Sydney and Melbourne.

Koala co-founder Dany Milham launched Milkrun in Sydney in September 2021 as a 10-minute delivery service, having raised A$11 million in June of that year.

Its initial backers included local VC Airtree, as well as Skip Capital and Grok Ventures – the family investment vehicles of Atlassian billionaires Scott Farquhar and Mike Cannon-Brookes.

According to The Australian, Milkrun’s investors, including Airtree, are now looking for a buyer or strategic partner for the business. But it’s hard to see how Milkrun is currently worth more than the $86 million in venture capital firms already poured into it when the delivery service continues to lose around $10 on every sale and continues to burn cash like its now defunct local rivals, Send and Voly.

Cutting losses

In June last year, as it prepared to hunt for more cash just five months after banking $75 million and 10 months after its first delivery, Milkrun began trimming its operations, cutting overtime and casual staffing, and hoping that alcohol sales would boost margins and turn around ongoing losses.

Pitch documents at the time revealed that the company generated around $4 million in monthly revenue and hoped to double that to an annual run rate of $100 million by the end of 2022. But the pitch, prepared in April, had the business losing $13 per order.

That pitch had Milkrun going on to generate more revenue per customer than Amazon’s US retail business and expand into areas such as insurance and takeaway, forecasting that the average order value in Sydney’s Eastern suburbs will rise over 15 months from $28.35 to $41.72 by June 2023, with alcohol included in the mix. Ten months ago it sat at $34.

Milham said in June that the loss had been reduced to $10 and believed they’d be making $1 an order within a couple of months.He told Startup Daily at the time that a $10 loss on each order “is actually a good number when compared to international peers”.

“This is in no way is a bad thing for our business at this stage and the fact it used to be $40 and even $13 two months ago, shows we are hitting our targets and scaling as planned,” Milham said.

But amid Milkrun’s drive to scale profitability, rival Send collapsed in May 2022, after failing to find investor support amid hopes to raise $15 million raise at a $50 million valuation.

Then Voly collapsed in November after also failing to attract additional capital. It launched in July 2021, raised $18 million in a Seed round led by Sequoia Capital India alongside Global Founders Capital and Australian-based Artesian Capital in December 2020.

The company’s administrators said Voly “may have been trading whilst insolvent from its commencement” in their analysis of the business.

Voly had a net loss of $13.6 million in the financial year to June 30, 2022.

Subscription butcher startup Our Cow acquired the Voly brand and other assets from the administrators just before Christmas.

Administrators Hall Chadwick believe creditors, owed $17.7 million in total, will receive between 15 cents and 27c in the $1 after winding up Voly.

Startup Daily has sought comment from Dany Milham and AirTree on Milkrun and will update this story if we hear back from them.

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