Much of the way people buy food is moving online. Restaurants are often replacing menus with QR codes that can be ordered on smartphones, and grocery shopping is being revolutionized with delivery services like his Instacart. But until recently, the other side of the food supply chain – how small restaurants and neighborhood grocery stores source their food – relied primarily on physical media: pen and paper.
Now, GrubMarket, which provides software and services that help connect and manage relationships between food suppliers and their customers, wants to make the distribution process more digital and efficient through new acquisitions.
California-based GrubMarket recently acquired Butter, a SaaS platform aimed at digitizing traditionally manual food distribution processes with AI, the companies told TechCrunch exclusively. Founded in 2020, Butter's eight-person team will join his GrubMarket, and its suite of software will be integrated with his GrubMarket's own suite of products.
GrubMarket founder and CEO Mike Xu declined to disclose the transaction price, while Butter co-founder Winston Chi told TechCrunch that the withdrawal “has cost investors and us… “Most of the parties involved are benefiting,” he said.
According to PitchBook, when Butter raised $9 million in Series A funding in November 2022, its post-fund valuation was $39 million (the company told TechCrunch that the reported valuation was approximately correct). It was confirmed). The startup has raised a total of $12.3 million, backed by investors including Google's AI-focused Gradient Ventures, Uncommon Capital, Notation Capital, Collide Capital, and angel investor Jack Altman.
GrubMarket has been on a buying spree over the past few years, acquiring more than 100 companies to date. Since the company operates a B2B e-commerce business, most of these deals are focused on supply chain integration. On the one hand, GrubMarket sources produce and ingredients directly from producers and supplies them to buyers such as supermarkets. On the other hand, you sell distributors the software they need to run their businesses. This is similar to his positioning of Amazon as both a marketplace and his SaaS provider.
Butter, along with Farmigo and IOT Pay, is one of the few venture-backed startups in GrubMarket's portfolio aimed at strengthening its technology stack.
It is unclear whether GrubMarket used balance sheet capital in the acquisition. Given the company's profitability and fundraising history, it wouldn't be surprising if that money came out of its pocket — Xu told TechCrunch that the company has been profitable on an EBITDA basis for three consecutive years. He said that annual sales are also trending steadily. It will exceed $2 billion by 2024.
Xu declined to comment on GrubMarket's fundraising plans, saying only that the company has raised “hundreds of millions of dollars” to date. GrubMarket's last publicly announced investment was in 2022 with a $120 million round that valued it at more than $2 billion. In late 2021, Bloomberg reported that the company was “in talks with banks” for a possible 2022 IPO.
scoop the butter
GrubMarket is effectively buying out a smaller competitor. In the midst of the 2020 coronavirus pandemic, Chi and his co-founder, Shangyan Li, launched a company that allows small and medium-sized food wholesalers to manage everything from inventory and customer relationships to orders. We launched Butter as an end-to-end vertical SaaS solution. .
These aren't necessarily unique features, and GrubMarket itself offers many, but like many SaaS startups, Butter was quick to jump on the generative AI bandwagon and develop tools to improve users' workflows. Did.
Butter's speech-to-text feature automatically converts customer voicemails into orders.Image credit: Butter
The ordering process in the food wholesale industry was particularly ripe for change. Food suppliers often wrote orders while listening to customer voicemails. Like a chef calling from a restaurant after counting inventory at the end of the day, or scrolling through her messages to order. This haphazard process often resulted in incorrect orders and stockouts. Analyzing sales and performance remained a dream.
Using AI, Butter has built capabilities that allow distributors to transform that type of unstructured data into information that can be easily viewed, tracked, and analyzed. It uses a combination of third-party AI models and its own AI to turn voice notes into lists of items for restaurants and supermarkets to order. Before the AI-generated information enters Butter's system, users will have the opportunity to verify its accuracy. And because the information is digitized, distributors can analyze sales and optimize inventory and pricing.
“Every sales person on the distributor side literally spends five hours a day transcribing orders from text messages and voicemails, so it significantly increases productivity and reduces manual processes,” says Lee. says Mr.
More importantly, Butter isn't asking customers to learn an entirely new workflow. “Distributors and restaurants alike don't want to change the way they communicate. We're not changing their workflow, but we're helping them centralize their sales knowledge,” says Chi.
“Each step is [of food distribution] It can be enhanced by AI. Even if it doesn't replace humans, AI can easily increase sales by 10x. We start with the order, as this is clearly the biggest pain point. ” he added Chi.
As it turns out, Butter's AI capabilities were the impetus GrubMarket needed to acquire and merge with its younger rival.
Fast transactions are the norm today
Four years after launching Butter, Chi and Li had developed a stable product, but found themselves struggling to expand their customer base without strong distribution channels.
As we looked across the industry, we realized that our most formidable competitor, GrubMarket, was reaching the customers we wanted. They also recognized that Butter could play a complementary role to his GrubMarket. Chi and Li decide to propose a merger to Xu.
Butter's AI assistant helps generate new orders based on text messages.Image: butter
“The moat is data, not technology. We thought, 'Wow, GrubMarket has all the data,'” Chi said, reflecting on the decision to sell the company.
Xu had already heard of Butter at that point, as Butter had customers from GrubMarket. “[Butter] Do more with your customers […] We even had teams sleeping in customer warehouses to get the job done,” Xu said. “But we all know that building an ERP system requires a large investment. Winston's team was only able to raise about $12 million, so sophisticated he continued to build the ERP system. It was difficult.”
Xu said GrubMarket had plans to automate order management, but its development resources were “fully equipped” and focused on other features, such as using AI to derive customer intelligence from raw data. It is said that he was guessing. So when Butter proposed the deal, the technological synergies were immediately apparent. Additionally, the startup had a presence in a segment GrubMarket coveted: seafood distributors. Butter reached out in March, and by the end of April, GrubMarket had already completed the acquisition deal.
Once the companies combine, GrubMarket will leverage Butter's products, including AI-enhanced chat commerce, to power GrubAssist, its enterprise AI assistant. GrubMarket also plans to add an AI-enabled prospecting and digital ordering module to its ERP system. This allows food wholesalers to automatically generate digital sales orders, regardless of the original medium in which the order was received (text, paper, voicemail, etc.). Email.
“Our style is very direct and fast-moving,” Xu said, commenting on the speed of trading. “That is wonderful [Butter] has joined us, eliminating the need to build from scratch, which is a great addition to our family of software products. ”