Burn-outs and layoffs: Is Grocery Delivery Startup Gorillas Struggling?
Fast grocer Gorillas rose to fame in the depths of the pandemic in 2020, promising to deliver food to home-grown customers in less than 10 minutes. Starting in Berlin, the company quickly attracted thousands of users, and expanded its team to more than 10 thousand employees.
As one of Europe’s first fast grocers, Gorillas quickly caught the attention of investors — and within nine months, the startup set a record for reaching rhino status. To this day, it has been raised $1.3 billion in venture capital funding from big names such as Tencent, DST Global, Coatue and Delivery Hero.
However, not everything was rosy. Last year, Gorillas was hit by a series of protests by workers, who claimed the company had Toxic work culture. And like many of its competitors, its path to profitability has been uncertain since its launch.
Now, with the news that Gorillas has It laid off more than 300 employees at its headquarters Amid the global market slowdown, could everything be about to turn in a completely different direction? We looked at some of the signs that could indicate this might happen.
Gorilla declined to comment on any points raised in this article.
Sources say gorillas burn money
“Trillions of dollars have been pumped into the economy in the past 24 months,” wrote Kagan Sumer, Gorillas founder and CEO. Staff email yesterday. “Everyone was a winner, everyone had access to capital and all of the companies had high valuations. This was also a good fit for the gorillas. Two months ago, in March, the markets collapsed and since then things have continued to deteriorate.”
Deflation is bad news for gorillas in many ways. Like its competitors, the business has been dependent on a seemingly endless stream of venture capital to fund its growth. In the midst of an economic downturn, this investment capital cash flow is slowing down Significantly.
Three sources confirmed that Sumer has reached out to existing investors to obtain more funding.
“The investors had a conversation with Kagan where they said, ‘You need to get your stuff in order or we simply won’t invest anymore,’” a former Sifted employee told me.
He added that the gorillas were burning 90 million euros a month at the end of last year. Another person familiar with the matter estimated the burn rate at 60 million euros a month and said Gorillas had 300 million euros left in the bank.
Gorillas last raised $1 billion in Series C in September — eight months ago — at a $2.1 billion valuation.
Far from profitable
Gorillas has been expanding rapidly since its March 2020 debut. It is currently in nine markets — although it announced on Monday that it will only focus on growth in five markets going forward: Germany, France, the United Kingdom, the Netherlands and the United States.
It currently has 230 warehouses, and IIn a meeting with Sifted in January, Sommer said Gorillas were only profitable with 25-30% of those.
The lack of profitability is not unusual in this sector. Getir Grocery Express Delivery Startup Only Profits At The Market Level In Turkey, Founder Nazim Salor Mankhool said In March of this year. Getir also expects to incur a loss of $1 billion for 2022, mentioned Bloomberg, which equals the amount it raised in its Series E and a significant portion of its Series D combined.
Customer acquisition For a quick start of grocery delivery
There are also huge marketing costs associated with customer acquisition within the rapid grocery model.
magazine manager I mentioned recently – After analyzing the invoices that Gorillas receives in the mail – that 41% of orders placed with Gorillas are backed by special offers. By comparison, 15% of orders at Flink – another player in Berlin – are placed using discounts, according to one insider to the post.
Despite its marketing efforts, Gorillas has fallen behind its competitors when it comes to app downloads.
Data from Apptopia shows that last month, the global number of Gorillas app downloads on Google Play and iOS was just over 540 thousand. This month, the number was just over 320 thousand. That’s compared to Getir, Gorillas’ Turkish competitor, which achieved over 2.5 million downloads globally in April, and just over 1.5 million in May.
Gorillas is also seeing a sharp drop in user sessions in its home market of Germany.
It doesn’t look good for any player in the industry – app downloads are now dropping across the board.
layoffs of a tech company in Europe
This week, along with Gorillas, Getir and Zapp announced major layoffs. Zapp is in talks to cut 10% of its rolesWhile Getir plans to lay off 14% of its employees globally. This is a dramatic turnaround for Getir.
LinkedIn data shows that Gorillas’ global headcount has grown by just 4% in the past six months, while Getir and Flink have grown their team by 55% and 52%, respectively.
Miriam Partington is the DACH Correspondent at Sifted. It also covers the future of work and its co-authors Startup Life newsletter from Sifted and tweets from mparts_
Freya Prati is a reporter at Sifted. She tweets from Tweet embed And writes our newsletter focused on sustainability – You can register here.