GrubMarket, the $3.6 billion food delivery and supply chain startup backed by Tiger Global, BlackRock and about 100 other investors, has acquired another food delivery startup as it continues to consolidate.The company is acquiring FreshGoGo, a New York-based B2C platform that sells Asian groceries and ready-made meals.
Terms of the deal were not disclosed, but it is understood to be a combination of cash and GrabMarket shares. GrabMarket said FreshGoGo has raised about $15 million from private investors. FreshGoGo founder Jianbing Duan will remain with the company and continue to run the business.
The acquisition comes on the heels of another deal: GrubMarket acquired Good Eggs for an undisclosed amount in early August.
FreshGoGo has about 210,000 customers in 27 states and generates about $30 million in annual revenue from selling groceries, food-court prepared meals and other prepared and ready-made foods. The company is not profitable.
The deal highlights the continuing evolution of the food logistics and delivery sector. Startups founded just before or during the COVID-19 pandemic thrived as many people around the world stayed home and looked for inspiration in at-home meals. These startups built apps that made ordering, supply chain management and delivery logistics easier.
Typically, these startups were built as three-sided marketplaces involving food suppliers, the people making the deliveries, and the end consumers who buy the food. Collectively, these companies raised hundreds of millions of dollars in venture funding as investors eagerly eyed growing consumer interest. And the startups obtained term sheets to compete for business with discounts, free promotions, and flashy ad campaigns.
But by 2022, things had changed. As people returned to pre-pandemic consumption patterns (and started going out again), the economy changed too. Inflation and unemployment rose, putting enormous pressure on companies that sell what we want. Technology companies focused on delivery services saw their growth plateau or even decline.
FreshGoGo had similar issues, but also appears to have had some other problems: This article from 2022 detailed the company's struggles to pay vendors who sell food on its platform on time.
Based in Silicon Valley and incubated at Y Combinator, Grub Market started with fresh produce and positioned itself as a digital interface for fruit and vegetable growers who were looking for a more efficient way to connect with retailers and consumers, eventually narrowing its focus solely to retailers and becoming a major supplier to Whole Foods and other well-known department and grocery stores.
The company has raised more than $600 million to date, according to PitchBook. And at a time when many small companies were struggling with unit economics, GrubMarket was growing and using its newfound muscle to acquire smaller companies. The company's goal is to fix what's going wrong with promising ventures, CEO and founder Mike Xu said in an interview. With Good Eggs, for example, Xu said the startup was on the cusp of turning a profit after years of struggling.
FreshGoGo is taking a completely different direction from Bay Area favorite Good Eggs, and today's deal signals that GrubMarket is exploring longer-term opportunities in food distribution. GrubMarket's other cuisine-specific acquisitions include Korean, South American, Caribbean and Greek.
Duan founded Fresh Go Go in New York in 2017, tapping into a vast network of independent food vendors and food courts frequented by Chinese immigrant communities and adventurous foodies looking for authentic cuisine that is hard to find in most grocery stores and mainstream Asian restaurants.
FreshGoGo's philosophy was to get these products to more people, and it built a broader logistics and online commerce business around that. The company claimed that the average basket size was over $100. It was a simple philosophy, but one that seemed hard to execute, judging by reports of late payments to suppliers and the stagnant growth that led to its sale to GrubMarket.
While GrubMarket remains primarily focused on B2B, Xu said the company will continue to acquire B2C companies when the opportunity arises, as it did with Good Eggs and Fresh Go Go. If the company can move more operations onto its own platform, both GrubMarket and the companies it acquires will be able to realize greater economies of scale, Xu said.
“We are aggressive in acquiring B2C companies that are financially and capital-efficiently sound,” he added. “These companies are either breakeven or profitable or have the potential to breakeven or profitable quickly after acquisition.”