Reports emerged this week that two U.S. local delivery players are scouting for opportunities to plant a flag in the hypercompetitive European market.
DoorDash is reported poised to make an investment in German grocery delivery startup Gorillas. Another player making a move is Gopuff, the Philadelphia startup rolling out a home delivery service focused on convenience items, like Q-Tips and beer, to borrow my colleague Neal Polachek’s description. The company is reportedly eyeing the U.K. grocery delivery app Dija.
DoorDash is the U.S. market share leader in the meal delivery space, according to Statista, with a 55% share nationally. Gopuff has been on a fundraising tear. The company is reportedly in the process of raising as much as $1 billion on a pre-money valuation of $14 billion. This comes on the heels of a $1.15 billion March 2021 raise on an $8.9 billion valuation.
According to Sifted.eu (a Financial Times publication), DoorDash is poised to lead a new funding round that would value the company at about $2.5 billion, which may sound like a lot, but is short of the $6 billion valuation the company was apparently hoping for.
In fact, the publication said DoorDash may yet buy the company outright for a “low billion” figure that unnamed sources described as a “fire sale.” Whether as an investor or outright owner, this deal would represents DoorDash’s first foray into Europe.
Dija is a London-based grocery delivery app that promises delivery in 10 minutes. As does Gorillas and seemingly every European delivery app. So a couple of things are interesting here.
Dija is by any normal standard of business, brand spanking new. The company began operations in March (that’s March 2021), after raising a $20 million seed round at a $100 million valuation, again according to Sifted.eu. Just five months later it’s for sale.
A Little Bubbly?
The online meal and, especially, grocery delivery spaces in Europe are extremely competitive. And it’s beginning to look like the competitive damn is about to burst. Earlier this week I wrote about the ride-hailing company raising $713 million at a $4.75 billion valuation. Bolt will use the money to push into Europe’s online grocery delivery business.
So what’s going on? Gorillas was only recently celebrated for its rapid rise from zero to unicorn. Now there is talk of a “fire sale.” Some of this may result from Gorillas’ growing pains, which led to labor problems and other issues. And some of this may reflect a broader problem of a delivery market that attracted too many players, too quickly. Earlier this week I compared this market to the infamous “scooter wars” of 2018.
All of these brands — Gorillas, Dija, Zapp, Glovo, Bolt, and others — have been in a race to the bottom, offering faster, cheaper delivery as a way to differentiate and grab share. First, it was 15 minutes. Then 10 minutes. If this continues, five minutes can’t be far behind. That would require a ghost store on every block, but if that’s what it takes to win, then so be it.
In this environment, companies tend to either keep raising money to accelerate to scale (if they can get it). Some will use the capital to diversify, others to grow through acquisition. Those that can’t raise the money sell quickly. Or they just disappear, leaving their investors holding the bag. It feels like the cracks are forming.