It's crunch time in the world of instant grocery delivery, with the latest turn representing a big blow specifically in Europe. Berlin-based Gorillas, which raised nearly $1 billion dollars at around a $3 billion post-money valuation only seven months ago, today announced that it would be laying off some 300 employees and exiting four markets.
The announcement came on the heels of a report in the German press last night about the layoffs. Half of the staff in its Berlin headquarters will be made redundant, and many of them would have only joined in the last six months.
According to a presentation it made to investors in March, the company has around 700,000 active customers. With the state of the venture market at the moment, investors are reigning in their activities, and startups are finding it harder to close their rounds.
A source told us that the company had about $300 million left in the bank, but it has run into trouble because it has significant outstanding debts owed to suppliers and others, and it has been operating on a monthly burn rate.
We contacted Gorillas and they declined to comment on market speculation.
The tech world has been reeling from a huge drop in technology finance, which has been playing out in the form of market caps getting slashed, as well as companies hiring.
Those who have been looking at the instant grocery market for a while will know that it has been inflated and that it has been corrected. There has been too much money flowing around too many startup, with founders and investors all looking to ride a wave of opportunity for fast delivery on the back of changing consumer habits during Covid-19.
While some companies have fallen by the wayside, others have been gobbled up, and a smaller group has continued to raise money.
There are a couple of different challenges for it, and for the wider instant delivery space.
On the part of Gorillas, the question will be whether it will be one of the last ones standing or if it will find itself on the bargaining table.
One of the consolidators, buying companies like Frichti in France, has also talked to buyers itself. Delivery Hero, which led a $1 billion financing for Gorillas in October, has its own profitability issues to contend with before bringing on yet another loss-making investment, according to sources. Others have also looked. It's not clear who else is in the market, but other big players are Getir, Gopuff, and Flink.
In the investor presentation that it made in March, Gorillas talked about its current market opportunity and future plans to move into a range of new areas, including Wearable health tech to help people make better life choices.
Second, more generally in the market, the shift of Gorillas will definitely send already-wary investors into a new level of anxiousness about the state of this market.
One person from another fast-delivery platform told me that this sheds a bad light on the business model, and raises more questions about it.
The challenge for players in this space has always been how to differentiate themselves from the rest of the pack, since they are all promising the same things at the end of the day.
Adding to that will be a new set of challenges: how to convince investors that the gap in the market actually exists, and that they are approaching it in a better and more profitable way than the rest of the market.
This was an extremely hard decision to make and it will help Gorillas become a stronger and more profitable business with a sharper focus on its customers and its brand. We are extremely proud and grateful for what our teams have achieved over the last two years and we will do everything we can to support our employees in this transitional phase.
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