Berlin Gorillas lay off 300 people and explore ‘strategic options’ in 4 countries as funds dry up for their $3 billion instant grocery game – TechCrunch
Gorillas, according to a presentation to investors in March that a source shared with us, has about 700,000 active customers.
The news also follows rumors we heard that the company had raised more funds. But, given the current state of the venture capital market – stemming from massive declines in public markets, investors rule their businesses and startups find it harder to close funding rounds – Gorillas was struggling to close. its own new funding in recent weeks.
A source told us that it’s been estimated that over the past few weeks the company had around $300 million in the bank, but it has run into trouble because it has large debts to suppliers and others, and it was (before the cuts announced today) operating on a monthly consumption rate of between $50 million and $75 million a month.
We’ve reached out to Gorillas for comment on this and will update this story when we get back to you.
The tech world – from publicly traded companies to much younger startups – has been rocked by a huge drop in tech funding, which has translated into shrinking market capitalizations; start-ups struggle to close financing rounds; and companies that freeze hiring and layoffs and cut costs in other ways to conserve cash because they miss revenue targets.
But those who have watched the instant grocery market for some time will know that it was long considered overinflated and deserved a correction. There has been too much money around too many startups, with founders and investors all looking to ride what seemed like a wave of opportunity for fast delivery due to changing consumer habits during Covid- 19. While some companies were abandoned, others were swallowed up and a smaller group continued to raise funds (for example, Zapp closed $200 million in January; Flink last week announced additional funding in the part of its purchase of Cajoo in France; Gopuff is apparently in the process of concluding a big round of financing of a billion dollars).
Gorillas news today lays out a few different challenges for both him and the wider instant delivery space.
First, from Gorillas, the question will be whether he will be one of the last ones standing (and whether these moves will help him get there), or whether he too will end up on the table of negotiations.
Gorillas possesses was one of the consolidators, buying companies like Frichti in France; but we heard he also spoke to buyers himself. A big contender, sources tell us, has been Delivery Hero, which led Gorillas’ big $1 billion fundraising in October; but he has his own profitability issues to grapple with before making another loss-making investment. Apparently others also watched. (It’s unclear who else, but other big market players include Getir, Gopuff, Flink.)
Gorillas hasn’t particularly helped his case: In the investor presentation he made in March, he talked not only about his current market opportunity, but also about his future plans to embark on a fairly ambitious range of new areas like wearable health technology to help people make better life choices. “An AI app telling you what to buy and what not to buy and what’s healthy or not,” one source told us with a laugh, comparing it to the lofty goals that WeWork (more later The We Company) had settled before collapsing.
Second, more generally in the market, the change in Gorillas will certainly send already wary investors into a new level of anxiety about the state of this market.
“We think instant groceries are profitable in the long run, but that casts them in a bad light and raises more questions about the business model,” someone from another quick delivery platform told me. “Now even more people will see this as if it were just a bubble.”
The big challenge for players in this space has always been to differentiate themselves from the rest of the pack, because ultimately they all promise the same things – a mix of essentials and sundries – and to consumers largely all look the same – you order with an app and receive your goods within an hour or often less.
Now, the added challenge to this will be how to convince investors that they are approaching this in a better and more profitable way than the rest of the industry.
“While this is an extremely difficult decision to make, these are necessary steps that will help Gorillas become a stronger, more profitable business with an increased focus on its customers and brand,” Gorillas said in its statement. “With our current investments, we are strengthening our position both financially and strategically for the future. We are extremely proud and grateful for what our teams have accomplished over the past two years and we will do everything possible to support our employees in this transition phase.