GrubMarket, the $3.6 billion food delivery and supply chain startup backed by Tiger Global, BlackRock and nearly 100 other investors, has added another food delivery startup to its consolidation spree: It is acquiring FreshGoGo, a New York-based B2C platform that sells Asian groceries and prepared meals.
Terms of the deal are not being disclosed, but we do know it’s a mix of cash and GrubMarket stock. FreshGoGo has raised around $15 million from private investors, according to GrubMarket. Founder Jianbing Duan will stay with the company and continue to run it.
The acquisition follows immediately on the heels of another deal: GrubMarket acquired Good Eggs for an undisclosed sum in early August.
FreshGoGo has approximately 210,000 customers in 27 states and generates annual revenue of approximately $30 million from the sale of groceries, prepared meals, and other prepared and commercial foods. The company is not profitable.
The deal underscores the ongoing evolution of the food logistics and delivery space. Startups founded just before or during the COVID-19 pandemic soared as much of the world stayed home and looked to spice up food at home. These startups developed apps to facilitate ordering, supply chain management and delivery logistics.
Typically, these startups were built as three-sided marketplaces involving food suppliers, delivery companies and end consumers. Together, they raised hundreds of millions of dollars in venture capital as investors eagerly eyed growing consumer interest. And the startups took the term sheets to compete for business with discounts, free promotions and flashy advertising campaigns.
In 2022, however, everything changed. Not only did people return to their pre-pandemic consumption habits (and go outside again), but the economy was also in upheaval. Inflation and unemployment rose, putting a lot of pressure on companies that sold “nice-to-haves.” Technology companies focused on delivery services experienced a growth plateau or even a decline.
FreshGoGo had similar problems, but it appears to have had other difficulties as well: This 2022 story details the company’s difficulties in paying suppliers – who sell food on the platform – on time.
GrubMarket, based in Silicon Valley and incubated at Y Combinator, started with fresh produce and positioned itself specifically as a digital interface for fruit and vegetable growers looking for more efficient ways to connect with retailers and consumers. Eventually, it focused only on retailers and became a major supplier to Whole Foods and other well-known department stores and grocers.
The company has raised over $600 million to date, according to PitchBook. And while a number of smaller companies struggled with unit costing, GrubMarket grew and used its newfound power to take on those smaller companies. Its goal, CEO and founder Mike Xu said in an interview, is to fix what doesn’t work at otherwise promising ventures. In the case of Good Eggs, for example, Xu said the startup is now close to turning a profit after years of struggles.
FreshGoGo has made a significant departure from Good Eggs, a well-known Bay Area favorite, and today’s deal shows how GrubMarket is exploring longer-term food distribution opportunities. Other cuisine-specific acquisitions GrubMarket has made include Korean, South American and Caribbean, and Greek cuisine.
Duan founded FreshGoGo in New York in 2017, leveraging the wide network of independent grocers and food courts frequented by Chinese immigrant communities and adventurous foodies in search of authentic food that is hard to find in most grocery stores or conventional Asian restaurants.
FreshGoGo’s goal was to make these products accessible to more people. The company built a broader logistics and online business around that goal, claiming that the average basket value was more than $100. It was a simple goal, but it seems to have been difficult to execute, considering the reports of missed supplier payments and stagnant growth that led to the company’s sale to GrubMarket.
Although GrubMarket remains primarily focused on B2B, it will also continue to opportunistically acquire B2C companies, as it has done with Good Eggs and FreshGoGo, Xu said. If the company can migrate more operations to its own platforms, both GrubMarket and the companies it acquires will achieve better economies of scale, Xu said.
“We remain opportunistic in B2C acquisitions and look for B2C companies that are financially sound and capital efficient,” he added, “that have either broken even or been profitable or can quickly break even or be profitable following our acquisition.”
