Spain’s Glovo wins $ 528 million as European food delivery market continues to heat up – TechCrunch

On the heels of Deliveroo which raised more than $ 2 billion before its London Stock Exchange debut this week, another hopeful in the food delivery industry closed a big round. Glovo, a Spanish startup with 10 million users that delivers take-out, groceries and other items in partnership with brick-and-mortar companies, landed a Series F of $ 528 million (450 million euros).

To compensate for the slim (or even negative) margins that are typically associated with many delivery startups, Glovo aims to become the market leader in the 20 European markets where it operates today, in part by expanding its ‘q-commerce’ »Service – delivering items to urban consumers in 30 minutes or less. It will use the money to double that strategy, including hiring up to 200 additional engineers to work at its headquarters in Barcelona, ​​as well as centers in Madrid and Warsaw, Poland, to develop the technology behind it. .

This is an important fundraiser not only for the company, but for its country of origin: it is the largest fundraiser ever raised by a Spanish startup.

“We started in Spain, where you have access to much less capital than other countries in Europe. We do more with less and that has made us thinner, ”said Sacha Michaud, the company’s co-founder, in an interview this week. “We have our own strategy and it seems to be working. “

The financing is led by Lugard Road Capital and Luxor Capital Group (the former is a subsidiary of the latter), with the participation of Delivery Hero, Drake Enterprises and GP Bullhound. All are former supporters of Glovo.

“We are delighted to have the continued support of Luxor Capital Group and all of our existing investors. Over the past few months, we have moved very, very quickly, but our vision remains unchanged, ”said Oscar Pierre, the other co-founder and CEO of Glovo, in a statement. “This investment will allow us to double our offer in our main markets, to accelerate our leadership position in places where we are already very strong and to continue to develop our excellent Q-Commerce division, as well as to bring new innovations. to our unique multi-category. offering to offer more choice to our customers.

The rating is not disclosed with this round, but when it raised its $ 166 million Series E in December 2019 – right before the COVID-19 pandemic that really changed the face of delivery services in many. many parts of the world – Glovo had a valuation of $ 1.18 billion, according to data from PitchBook. Michaud would only confirm to me that it was “a round table”, which would put it at at least $ 1.7 billion, if not more, based on that estimate.

The funding follows a busy period of fundraising in the sector as investors rush to embark on the delivery of hot meals, groceries and other essentials to Europe – a business model in Europe. growing rapidly in the most normal times that have exploded over the past year as an essential service for consumers confined to their homes, often on a government mandate, to prevent the spread of the coronavirus.

Just last week, Gorillas in Berlin raised $ 290 million on a valuation of over $ 1 billion for its on-demand grocery business; Everli from Italy (formerly Supermercato24) raised $ 100 million (Luxor is also one of its investors); Getir in Turkey – also rapidly expanding across Europe – raised $ 300 million on a valuation of $ 2.6 billion as Sequoia took its first bite of the European food market; and, it seems, Zapp in London has also closed a $ 100 million financing. Earlier in March, Rohlik of the Czech Republic pocketed $ 230 million.

Amid all of these private increases, we also had the IPO of Deliveroo yesterday, which – as IPOs so often do – exposed some of the more delicate aspects of the business. The company – which is backed by Amazon, a formidable food and essential delivery player – easily raised the most money of the month – $ 2.1 billion in private placement before listing. But it then continued its debut on the LSE with stocks gradually collapsing throughout the day and ending well below its offer price.

The areas of concern around Deliveroo serve as caveats for each of them: it’s not just about determining the price of an IPO and the allocation you give to future shareholders, but also the unit economy of your business model, the price of competition and where labor costs will fit into the bigger picture (and the bottom line).

“We have our own way and we are doing a very good job,” Michaud said in an interview when the topic of Deliveroo’s IPO came up. “We’re still David against the Goliath over there.”

Part of this for Glovo also included some decisions made on streamlining its own business: the company sold its operations in Latin America as part of a $ 272 million deal to its backer Delivery Hero the last year to focus only on Europe and adjacent geographic areas, where it made acquisitions.

Between its E Series and the F Series announced today, Glovo itself was one of the companies raising funds for specific purposes as well, and these efforts indicate how it plans to proceed in the weeks and months to come. on its own growth plan.

In January, the startup announced a strategic deal with Swiss real estate company Stoneweg, which has invested 100 million euros ($ 117 million) to co-develop a number of “dark stores” in areas where Glovo already operates. to improve its distribution networks and help speed up delivery times.

This is part of an order processing operation that complements the hot dishes that Glovo distributes for its restaurant partners: all companies that have not built their own (expensive) B2C delivery networks but who nevertheless wanted to provide this service. to consumers.

Although the company promises deliveries in 29 minutes today, in many markets, Michaud said, it is already averaging 10 to 15 minutes and the goal is to make it the norm everywhere. This is partly an operational challenge, but also a technical one; this is one of the reasons why the company is adding more engineers and expanding its platform.

Hot food delivery to restaurants remains the biggest category of business for Glovo, he added, but the company has seen an increase in demand for other types of items and is expanding it accordingly.

“With COVID, we’ve delivered pretty much anything you want in your city,” Michaud said. “COVID has been an accelerator and educated the market. Instead of driving through town and spending time waiting and shopping for items, whatever I want and Glovo will bring it to me. Why shouldn’t I do this? He thinks the more traditional rush of people shopping in person is “certainly not back”, with grocery stores in the same position as restaurants in a few years. This leads the company to expand into other areas: “Clothing, fashion and pharmacy, flowers. Hopefully we are now in a good position to do so.

Social deliberations

This position, of course, will involve an important component of this three-sided market. In addition to the restaurants and retailers who partner with Glovo and consumers who use the app to buy and have things delivered, there are the delivery people and couriers who do the first and last mile work to get things done. enter the goods into the system. , then to customers.

System couriers today work largely on a freelance basis, often balancing jobs across competing applications, and their efforts, and the way they are paid, have been the subject of much scrutiny here and at United States.

In short: companies say couriers have an incredible opportunity to make money; but many couriers and organizations supporting their cause believe that the reality is far from that.

This has played out with a number of very public protests and is now starting to turn into formal legal measures to secure the rights of these workers. Aside from the ethical angle here, this is of concern to investors who focus more on the bottom line due to the implication of additional costs. For companies that are already working with low margins (or in many cases, losses), this doesn’t look great. Indeed, it is very likely that these issues were part of what weighed on Deliveroo in its public listing and poor start.

This also played for Glovo. The company lost a case in Spain’s Supreme Court in September last year, where the court rejected its attempt to classify a courier as a self-employed rather than an employee. Now the country is working on more formal reforms to put in place guidelines and requirements for companies to prescribe benefits to these workers. It will take some time to play out, and in the meantime, broader European efforts are also underway to harmonize the approach across all EU countries.

This is a complicated question, but Glovo essentially advocates keeping couriers as self-employed, but nonetheless supports the idea of ​​benefits provided to these workers by those who take their services (like Glovo), and he would like the approach to be European. large.

“We believe there should be more social rights for workers,” Michaud, who oversees the company’s public policy as part of his mandate. “We believe in an independent model with additional social rights that companies like Glovo would give them, but in many countries the regulations are not there to make that happen.”

But not everything is simple either since Glovo does not support some of the other aspects of this labor reform.

“We believe that strict and rigid tables and minimum wages are not the way to solve the problem,” he added. Glovo’s point of view is that the flexibility of the delivery business model means that the shift to fixed wages and full-time employment means it’s not a good outcome for couriers. Ultimately, as it plays out with finances, the company (and others) negotiate and hope to recoup some expenses while conceding others.

Investors seem poised to answer these kinds of questions and their long-term impact, given that compromise for them is a starting point in what has been one of the region’s most successful tech efforts.

“Our investment in Glovo reflects our commitment to a company and leadership team that continue to innovate and disrupt the on-demand delivery space,” said Jonathan Green, Founder and Portfolio Manager at Lugard Road Capital, in a statement. “As a long-term investor in Glovo, we are delighted to see the company continue to delight clients with its unique multi-category offering, amid a huge market opportunity in existing and new geographies. “

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