Funding Room | 01 April
Are grocery delivery companies the next VC battlefield after raide hailing companies?
Start-up Of The Week
Product
Zapp is an on-demand grocery delivery start-up. They look to be focusing less on fresh food/groceries and more on convenience, à la goPuff in the U.S., thus targeting impulse purchases rather than trying to usurp the traditional grocery shop.
Location
London, UK
Raised
Allegedly raised c.$100m between its Seed round and Series A (announced yesterday)
Investors
Lightspeed, Atomico, 468 Capital and Burda, alongside notable angels such as Mato Peric, Christopher North (former Amazon UK CEO) and Stefan Smalla (Westwing CEO)
Revenue Model
Retailer - owning “dark” stores with riders being employees
Food For Thought
The first lockdown (back in March 2020) has seen an unprecedented rise in grocery deliveries with companies having all their delivery slots booked weeks in advance and new registrations deactivated. These regular grocery delivery companies were often supermarket companies or companies running deliveries for said supermarket companies.
Fast forward one year later, the delivery issue has been resolved… and then some more. All the hype is now around being delivered in under an hour and in some cases under 15mins!
Across Europe, VCs are piling money into the sector, start-ups are throwing money at real estate, marketing and hiring, and consumers are (once again) getting treated to a whole lot of discounts in an attempt to win their hearts.
With new funding rounds and launch announcements coming thick and fast, it’s hard to keep track of who’s who and what’s what.
Players
The veteran in the space is Getir, which launched its 10-minute grocery delivery in Turkey in 2015 and now operates in 23 cities in its home country and in London. On Friday, it closed a $300m Series C at a $2.6bn valuation, led by Sequoia and Tiger Global. It is set to enter the German, French and Dutch markets this year.
Germany’s Gorillas, which launched in Berlin in June 2020, also hit the $1bn valuation mark last week after raising €285m — and became Germany’s fastest ever unicorn.
UK-based Dija has only been operational for one month, but has already started acquiring competitors: it bought Cambridge-based Genie in March.
Just yesterday, Zapp, a London-based on-demand delivery and “dark” store operator, raised a series A which is estimated to be around $100m, with investors including Lightspeed, Atomico, Burda and 468 Capital. And this less than a year after it was founded as well.
All are doing more or less the same thing: they offer customers around 1,000-2,000 grocery goods, which can be ordered via an app and will arrive in less than 15 minutes. These goods are stocked in ‘dark stores’ — mini warehouses in the city centre — and delivered by a fleet of riders, mostly on e-bikes.
Where they operate
What do they offer
Despite the 10-minute delivery promise being just about the first thing consumers learn about any of the operators, it’s not actually so very important, thinks Alec Dent, COO and cofounder of Weezy.
“Speed is the wow thing that attracts someone in,” he says. But longer term, it’s not what matters. “Ultimately people care more about reliability and choice of product. If I bring you what you don’t want extremely quickly, it’s not that useful.”
“A service that always comes in 25 minutes — which is slow compared to what we’re doing — is still better than a service which might come in five minutes or 35 minutes.” Ghalim agrees that speed is not the be all and end all: “What’s important is to limit the percentage of orders where you completely screw up. Those are the ones that kill you from a reputational point of view.”
Why are VCs so excited?
“Grocery and supermarket has been the obvious last piece of the food market to be disrupted in Europe,” says Ophelia Brown, partner at Blossom Capital and an investor in Dija. “If you know anything about European tech outcomes, food is something Europeans know how to innovate and disrupt. And the consumer spend is significant.”
“Covid-19 showed how broken online supermarkets and grocery shopping is — Ocado couldn’t keep up with demand. Inflexible booking slots, substitutions — not a good experience,” she adds.
While consumers’ attention might be focused on the surprising speed of these start-up at the moment, investors are focused on the enormous and mostly online market they could take a bite out of.
“This wasn’t a 10-minute convenience item pitch,” says Brown. “It was: ‘The weekly shop is broken, there’s no reason it’s done like this.’ They want to fundamentally change the supply and logistics of the way we all order grocery and convenience items.”
“People are backing the macro opportunity, and the team,” says Antoine Nussenbaum, partner at VC firm Felix. But will consumers bite? Brown thinks so: “If you could get just as good produce at a reasonable price, will people buy it? Absolutely.”
Challenges ahead
The winners will be decided on their operational capacities. “It’s an execution play,” says Yacine Ghalim, partner at Heartcore and an investor in Weezy.
“History told us that when it came to meal delivery, dominance is quite important,” he adds. “There’s significant first mover advantage if you’re the first name that pops into people’s minds. It’s harder to make people switch providers than it is to get them to try a service for the first time.”
On top of that, he says, follow-on investors will be looking at how many dark stores start-ups have opened — “and the pace at which they’re able to stack those stores on top of each other”.
Then there’s the unit economics — although at this early stage, most investors won’t be paying all too much attention to them. “None of them will be profitable in the next two years,” says Christian Meermann, partner at Cherry Ventures and an investor in Flink.
Matthieu Vincent, cofounder of strategy consultancy Digital Food Lab, points out that the European players take a much smaller margin compared to US competitor GoPuff: “GoPuff delivers an Oatly milk carton for $6, Weezy does it for $1.80 and and Gorillas for $1.90.”
“Moving forwards, it’ll be interesting to see whether they’ll start taking a higher margin out of each product. Will they use Uber and Deliveroo’s model, which requires heavy funding at launch — and once they have a solid customer base, make people pay more because of the unique fast-delivery offer?” he adds.
Retention metrics will also be key. “The story is that these companies are creating a new consumer habit, so they have to show that they’re becoming part of people’s daily routines, or they’re not going to be able to raise money,” says Ghalim.
“The last thing is their ability to hire great people. These companies tend to be magnets for talent.”
The actual technology itself is less important. “It’s not a deeptech play,” says Ghalim. “It’s fairly rudimentary. I don’t think it’ll be that much of a focus for now.”
Real estate might also become a challenge, if rental prices rise due to the rising competition for dark store spaces.
Those that can’t expand as fast as others, or raise as much capital, might be acquired by a bigger player. “There will be some form of consolidation — some will merge, others will go out of business,” says Christian Meermann.
Funding Rounds
Dach
Gorillas, the Berlin-based on-demand grocery start-up Gorillas raised $290m in Series B funding, at a valuation that surpasses $1bn. The round was led by Coatue Management, DST Global and Tencent, with participation from Green Oaks, Fifth Wall and Dragoneer. Previous backer Atlantic Food Labs also followed on. Read more.
Kontist, the Berlin-based FinTech start-up that combines banking for freelancers and the self-employed with tax advisory, raised a €25m Series B. The round was led by Founders, the Danish start-up studio and investment firm, which incubated the company together with Plantener. Haufe Group also participated in the new round. Read more.
SellerX, the Berlin-based Amazon-native brand buyer raised an additional €26m topping out at €130m in available capital. The new financing was led by 83North with all existing investors including Cherry Ventures, Felix Capital, Zalando co-founder David Scheider, former Amazon UK CEO Christopher North among others. Read more.
Staffbase, the Chemnitz-based provider of digital solutions for internal communications raised $145m in growth funding led by General Atlantic. Existing investors Insight Partners and e.ventures will also contribute to this round of financing, KIZOO and Capnamic Ventures remain invested. Read more.
GoStudent, the European online tutoring platform raised a €70m Series B. Coatue led the round with participation from existing investors Leftlane Capital and DN Capital. Read more.
ProductsUp, the Berlin-based e-commerce data integration company, raised $20m in funding led by Nordwind Capital and venture debt provider Deutsche Handelsbank. Read more.
France
Sensaterra, the Paris-based operator of a European e-commerce marketplace intended to offer hot beverages directly from independent specialists, raised €1m from various business angels, including Denis Fayolle (The Fork), to launch its digital platform. Read more.
Elistair, the Dardilly-based developer of tethered drones, raised a €5m Series B from Omnes and insider Starquest Capital. Read more.
UK & Ireland
PPRO, the London-based payments infrastructure provider has topped up its latest $180m funding round with an additional $90m investment from JPMorgan Chase and Eldridge. The company ventured into Unicorn territory in January after picking up $180m in funding from Eurazeo Growth, Sprints Capital, and Wellington Management. Read more.
Netwealth, the London-based challenger wealth manager backed by a string of leading City figures, secured its fourth round of fundraising of £11.3m. The round included a cash injection from former M&S boss Stuart Rose. ICAP founder Michael Spencer who previously invested £5m in 2019 has committed a further £5m. Total fund raise sits at £38m. Read more.
Butter, the London-based FinTech platform creating a BNPL travel agency, closed a £15.8m funding round. It was raised via BCI Finance, the credit arm of venture builder Blenheim Chalcot, as well as a number of other private angel investors. Read more.
Manual, the London-based producer of wellness products intended to improve the everyday lives of men by providing knowledge and solutions for key parts of their well-being, raised a $30m Series A from Sonoma Brands, Waldencast and FJ Labs. Cherry Ventures, Felix Capital and GISEV Family Office also participated in the round. Read more.
Cyan Forensics, the Edinburgh-based developer of forensic analysis software intended to help law enforcement in finding digital evidence, raised a £5m Series A led by Par Equity. Mercia Asset Management, Scottish Enterprise, Triple Point, Don Macleod and SIS Ventures also participated in the round. Read more.
Gro, the London-based provider of DeFi products intended to provide financial services, raised a £7.1m Seed round from Galaxy Digital, Framework Ventures and Northzone. Read more.
Nested, the London-based real estate agency start-up, raised £5m from Axel Springer and insiders Balderton Capital and Northzone. Read more.
Jola, the Nottingham-based data specialist received a £10.3m funding boost from growth capital investor BGF who will take a 25% stake in the company. Read more.
Sorted, the Manchester-based delivery experience pioneer raised £11m in growth capital. Existing investor Chrysalis Investments led the round. Read more.
Others
Everli, the Milan-based marketplace for online grocery shopping that started in Italy but now also operates in Poland, Czech Republic and France, raised a $100m Series C. The round is led by Verlinvest, with participation from new investors Luxor, DN Capital, C4 Ventures, and Convivialité Ventures. FITEC, 360 Capital, Innogest, and DIP also followed on. Read more.
Getir, the Istanbul-based ultrafast grocery delivery service, completed a $300m Series C funding round just two months after finalising its $128mn Series B round. The Series C round was led by Sequoia Capital and repeat investor Tiger Global. The investment round included 7 out of 8 existing funds. Read more.
Hiber, the Amsterdam-based European satellite and communications start-up has secured €26m in EU and private investment to expand its IoT satellite network. The funding comes from the European Innovation Council Fund. The EIC co-invested with an innovation credit provided by the Dutch government and existing shareholders. Other investors include Finch Capital, Netherlands Enterprise Agency and Hartenlust Group. Read more.
Otrium, the Amsterdam-based operator of a shop-in-shop outlet platform intended to offer latest fashion clothing at discounted rates, announced an approx. €102.3m Series C co-led by BOND and Index Ventures. The round also had continued participation from Eight Roads Ventures, and additionally a general partner at BOND, Juliet de Baubigny, will also join Otrium’s board of directors. Read more.
Glovo, the Barcelona-based developer and operator of an on-demand delivery application designed to receive orders and deliver things within the city, raised a €450m Series F led by New York-based investment managers Lugard Road Capital and the Luxor Capital Group. Read more.
Interesting SPACs
Cazoo, the London-based used car platform, agreed to go public at a $7bn pro forma equity valuation via acquisition by AJAX I (NYSE: AJAX), a SPAC formed by hedge fund managers Dan Och and Glenn Fuhrman. Cazoo had raised around $570m in VC funding from firms like Octopus Ventures, Stride.VC, Entrée Capital, General Catalyst, D1 Capital Partners, Fidelity, L Catterton, Durable Capital Partners, Spruce House Partnership, Novator, Mubadala Capital and DMG Ventures. Read more.
Bob Diamond, former Barclays CEO and CEO of Atlas Merchant Partners, filed to raise a pair of $250m SPACs. Read more.
Brad Feld (Foundry Group) and James Lejeal (ex-Splunk) filed to raise their second and third software SPACs, targeting $200m and $350m, respectively. Read more.
AeroFarms, a Newark, N.J.-based vertical farming company, agreed to go public via merger with Spring Valley Acquisition, a SPAC. A deal values the combined business at $1.2bn. Read more.
Lilium, the Munich-based air taxi developer, agreed to go public at an implied $3.3bn valuation via Qell Acquisition Corp. (Nasdaq: QELL), a SPAC led by ex-GM exec Barry Engle. Lilium had raised nearly $400m from firms like Atomico, Tencent, Freigeist, Balllie Giffrord and LGT Group. Read more.
Intelligence
Valutico, the Vienna-based fintech that provides valuation tools, wants to raise €3m to €5m in its first institutional round in the second half of the year.
Wisefood, the Munich-based manufacturer of edible tableware, is holding talks for a growth round as it looks to capitalize on the momentum from the EU’s upcoming plastic straw ban.
Investors
The European Innovation Council launched a €3bn fund to invest in European health and deep-tech start-up. Meanwhile, Germany's government is providing €10bn in new funding for a new growth equity tech effort. Read more.
Singular, a new Paris-based VC firm raised €225m for its initial fund. Read more.
EQT Ventures promoted Laura Yao to partner and added Anne Raimondo (ex-Zendesk SVP of ops) as an operating partner.
Kaya VC, a Central Europe-focused VC firm, raised €72m for its new fund. Read more.
Shikha Ahluwalia joined European VC firm Balderton Capital to focus on investments in the DACH region. She previously was an investment banker with JP Morgan. Read more.
Asheque Shams, formerly at GA, joins Kismet Capital as Partner to help build a Growth Equity and SPAC franchise in EMEA. Kismet is committing to invest at least $100m per year in tech businesses in Europe, Israel, Middle East and Africa. They have also raised $750m across three SPACs.
Good Reads
Chart Of The Week
The environmental impact of losing three Amazonian trees might be more severe than the loss of 14 trees in a country like Norway: