When people talk about “online food delivery services” they likely think of the Uber Eats, Instacarts and Getirs of the world. But today, a startup tackling another aspect of the market – the supply chain that later turns the wheels of the larger food distribution machine – announced a large round of funding as it continues to grow.
GrubMarket, which provides software and services that help connect and manage relationships between grocery suppliers and their customers – which may include wholesalers and other distributors, markets and supermarkets, delivery startups, restaurants, and consumers – has in a. $ 120 million in Series E funding
The financing comes from a broad mix of investors. Liberty Street Funds, Walleye Capital, Japan Post Capital, Joseph Stone Capital, Pegasus Tech Ventures, Tech Pioneers Fund are among the new funders from existing investors Celtic House Asia Partners, INP Capital, Reimagined Ventures, Moringa Capital Management, and others , along with other unnamed participants
Mike Xu, founder and CEO of GrubMarket (pictured above), tells me that the company is currently profitable on a large scale. It now has a $ 1 billion annual run rate after sales increased 300% year over year, with some markets like New York growing even faster (it rose from less than $ 10 million to $ 100 million and more).
Currently with offices in Arizona, California, Connecticut, Georgia, Michigan, New York, New Jersey, Missouri, Massachusetts, Oregon, Pennsylvania, Texas, and Washington, and approximately 40 warehouses across the country. GrubMarket had a pre-money valuation of over $ 1 billion and is now looking to grow even more, in terms of both field and technology, and to advance in a market largely absent from competitors.
“We are still the first mover in this area,” said Xu when I asked about rivals in an interview. “Nobody is doing a consolidation on the supply chain side like us. We are trying to consolidate the American food supply chain through software technologies and at the same time find the best solutions in this area.”
The story goes on
(And in a given context, the $ 1 billion plus valuation is more than double what GrubMarket’s October 2020 valuation was when it raised $ 60 million on a $ 500 million after-the-money valuation .)
In the longer term, it is planned to tentatively submit an IPO by the summer of 2022, added Xu.
GrubMarket started out a few years ago as one of many companies that wanted to offer a more efficient farm-to-table service. With consumers’ growing interest in better quality and more traceable food, there was an opportunity to build a platform to connect producers with the consumers, restaurants and grocery stores who bought their products. (Grocery stores can be stand-alone businesses, by the way, or something much larger: One of GrubMarket’s largest customers is Whole Foods, which GrubMarket uses to deliver products to certain regions of the US. It is currently the company’s largest customer.)
As we wrote last year, GrubMarket – like many other grocery delivery services – found that the pandemic initially sparked a big boost and rush of demand on the consumer side of the business as more and more people turned to the internet for ordering and delivery services offsetting the fact that many stores were closed or just wanted to cut down on their personal purchases to slow the spread of Covid-19.
But fast-forwarding to this day, while the startup is still serving consumers, this isn’t the bulk of its business right now. Instead, it is B2B2C that serves businesses, which in turn serve consumers. Xu says overall consumer demand has decreased significantly compared to last year.
“We believe that reopening restaurants has resulted in more people eating out and spending less time at home,” Xu said, “and they can go back to physical grocery stores so they don’t care buy raw materials online as before. I don’t want to offend other food tech companies, but I think a lot of them will see the same thing. I think B2C will really slow down in the future. “
The opening up for GrubMarket consists in not only positioning itself as an intermediary between producers and buyers, but in doing so through technology and the consolidation of the previously very regionalized and fragmented market.
GrubMarket has bought no fewer than 40 companies in the past three years. While some of these served to expand geographically (10 acquisitions were made in the Los Angeles area alone), many were also pushed to double the technology.
These included Farmigo, once a contender for Disrupt Battlefield who became the software provider for CSAs (an area where GrubMarket sees many opportunities), and software that helps farms manage their business workforce, insurance, and more: Pacific Farm Management is an example of the latter.
GrubMarket’s in-house software, WholesaleWare, a cloud-based service for farmers and other food manufacturers, posted sales growth of 3,500% last year and now manages over $ 4 billion in wholesale and retail operations in the US and Canada.
There will be obvious opportunities to expand what GrubMarket is doing deeper on the buying side to meet the needs of its customers, but this is also a very crowded market in many ways. (And not just overcrowded, but overflowing with big companies. Just today, Toast, the company that develops software for restaurants, filed for an initial public offering of $ 717 million with a potential $ 16.5 billion valuation.) Instead GrubMarket will continue to focus on what is a rather overlooked aspect of the supplier.
“I focus on the food supply chain,” said Xu. “Operators in the food supply chain do not have access to software and e-commerce technology most of the time. But we’re not just a lightweight online ordering system for customer relations and even human resource management for wholesalers and distributors. “In the longer term, this will mean that GrubMarket will probably also begin researching networked hardware to help these customers too: robots for picking and moving items are on that agenda, Xu said.
“GrubMarket has built a profitable, high-growth business backed by its industry-leading technology platform that is reinventing corporate access to healthy, fresh food,” said Jack Litowitz, director of strategic investments at Reimagined Ventures, in a statement. “We are proud to support GrubMarket as it continues to expand into new regions and expand its WholesaleWare 2.0 software platform. At Reimagined Ventures, we always strive to invest in companies that are innovatively transforming inefficient industries. Mike Xu and the GrubMarket team built one of these companies. We look forward to supporting their vision and working to make the food supply chain more efficient. “
“GrubMarket is transforming the trillion dollar grocery distribution industry at unprecedented speed by implementing advanced digital solutions and operational discipline. The size, growth and profitability of the company are extraordinarily impressive. Pegasus is excited and honored to be part of the exciting journey of GrubMarket, ”added Bill Reichert, Partner at Pegasus Tech Ventures.
