Rapid delivery e-grocers see sharp decline in funding after pandemic-fueled highs
So far in 2022, $3.6 billion has been invested across 15 deals in the sector, according to PitchBook data. This represents a marked decrease from last year’s peak, which saw 36 rounds worth a total of $7.6 billion.
These e-grocery startups, which promise to deliver goods to consumers in as little as 10 minutes, saw huge interest during the pandemic as the use of online shopping rose and users sought to avoid public spaces.
Companies such as Gorillas and Getir raised several mega-rounds in a short period of time with some, like Germany-based Flink, even reaching unicorn status after only a few months of operating.
Yet the sector has been plagued with issues. Significant VC interest led to multiple new startups, and the sector quickly became overcrowded, particularly in large cities, pushing down profit margins. Rapid delivery e-grocers also have high infrastructure costs due to the need for fulfillment centers in each of their locations, which makes achieving profitability even more challenging.
With the downturn shifting investors’ attention toward profitability and away from fast-growing, capital-intensive businesses, many startups in the sector have had to scale back their ambitions or even shut their doors.
In March, three US-based companies—Buyk, Fridge No More and Zero Grocery—announced the end of their operations. Layoffs spread across the sector among larger players, with Gorillas cutting 300 employees in May and Gopuff reducing its workforce in July by 10%.
More consolidation is expected in the sector as startups struggle to get fresh funding. Last week, reports emerged that Istanbul-based Getir was in talks to buy Gorillas, which is currently backed by investors including Coatue, DST Global and G Squared.
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