Gopuff made a name for itself by delivering all types of items to people expediently, including snacks, groceries, cleaning supplies, and even alcohol. It saw especially potent growth and popularity due to the pandemic and shutdowns, though things have since changed for the 29-year-old founders, who have started to stumble.
In fact, until recently, the company seemed to be doing well, with talks of additional funding in the realm of $1 billion floating around. However, some investors involved in the potential funding backed out due to the rate at which Gopuff was losing money. And with that funding evaporating, Gopuff has found itself forced to downsize its workforce, leading to multiple rounds of layoffs.
Moreover, aside from losing hundreds of employees, other things have started to pile up. The company entered a hiring freeze earlier in the year, put a halt on a new business opportunity, and lost key executives. The executives were meant to take the lead on modernizing Gopuff’s ecommerce software, something essential for any online business, much less one so massive.
As a result, many have started questioning whether the co-CEOs, Gola and Rafael Ilishayev, have the ability to lead a company of this size. In fact, there have been reports of employees questioning whether the two were still fit to control the company and its future due to an overall lack of business experience between them.
Of course, while others, such as the company’s head of engineering, Rekha Singh, agree that their experience might not be enough, it is not all negative. She did give them credit for hiring the right people with the necessary experience, which inspires confidence.
Gopuff’s meteoric rise suffered significantly from the problems already covered, leading to many people lacking confidence in the company’s leadership. Part of that is due to Gopuff’s pharmacy business crumbling and the fact that BevMo accounts for around half of the company’s revenue.
But those are not the only things giving employees cause to worry. The founders are also known to have a remote management style, which started with the two moving to a lavish suburb in Miami. While the city has become something of a second headquarters to the company, the action and lifestyle have brought up further concerns about leadership.
But all of that is only made worse due to the current economic climate, where a potential recession threatens to hurt the business through reduced delivery sales growth. Additionally, funding is no longer as easy to get, making the failure to secure the aforementioned $1 billion more damaging.
Essentially, the company no longer has access to the type of money that allowed it to expand so rapidly. And since the expansions into places like Europe, New York, and Los Angeles lost the company money, it begs the question of how things will go without the hefty backing received during the pandemic years.
It does not help Gopuff’s case that investors are looking for stabler options, with low costs and predictable revenue being far more appealing. All of this led to the company pulling back and delaying its initial public offering (IPO).
It should not come as a shock, though, since the company lost a significant amount of money last year. In fact, it hemorrhaged around $500 million in cash, and that is before one-time expenses. Although it managed to generate $1 billion or so in sales through its app, that is not enough when you consider the company’s business model or the fact that it saw similar losses the year before (2020).
Gopuff does not operate like its competitors, such as DoorDash. While the two are often compared, DoorDash is far healthier compared to Gopuff, with superior revenue and a nice bit of profit. However, part of that is due to the business model, which relies on purchasing inventory and leasing warehouses.
The need for warehouses and inventory on the front side of things leads to a need for significant capital, which is responsible for how much cash the company goes through. It is to the point that despite increasing the profits per order, it is still difficult to succeed. And Gopuff is not alone, with others in the same instant-delivery sphere finding it difficult to manage losses or stay open at all.
Lack of Proof
Gopuff is not the only company to use a business model centered around warehouses, with many smaller companies replicating the approach. However, those companies do not have the same additional revenue as Gopuff, which comes from BevMo and Liquor Barn. The two chains were purchased during the pandemic, and they account for nearly half of the company’s revenue.
While the added revenue is certainly not a bad thing, it is not exactly good, either. That revenue does not come from customers using the app, which has the potential to hurt the company’s valuation. For that reason, there is a need for the percentage of revenue coming from the retail chains to decrease.
The company is optimistic about the overall BevMo sales reducing in percentage over time, but the high retail revenue is not the only problem the company faces.
The heavy losses faced by the company have caused investors to turn away, evident from the potential $1 billion in funding that fell through. In fact, much of the concern from investors comes from Gopuff’s inability to prove it can succeed. After taking losses in Europe and large American cities, there is little faith that the company can succeed in major metropolitan areas.
Gopuff’s internal problems also contribute to its troubles and the lack of confidence from employees. Initially, the company hired executives to fill key roles, including people from reputable tech firms. One example is Andy Berman, head of ad sales. Berman joined the company in 2020, coming from Facebook. However, he resigned prior to the layoffs this year, throwing the company’s advertising initiative into further disarray.
Other executives include the director of strategic partnerships and head of product, who came from Uber and Airbnb, respectively. Both parted with the company this year, adding to the negative atmosphere amidst the two rounds of layoffs.
The company has hired new individuals to fill the top-level executive spots, including Maria Renz. Renz’s impressive background includes time at Amazon and as a former board member at DoorDash. Her experience has led her to oversee Gopuff’s business in North America.
Although Gopuff has been losing money in recent years, there were days when the company had a positive cash flow, starting with its beginning in Philadelphia, a metropolitan area where it still does quite well. It all began when the founders were in university, with the two of them delivering items to other students. And for the first few years, between 2013 and 2016, the company did well without entangling with venture capitalists.
But eventually, Gopuff started to expand into other areas, going beyond hungry college students and moving into cities including Boston. At that time, they already operated differently from services like Instacart, selling a pre-stocked inventory of goods that is stored in warehouses. That is the secret behind its speed, with these micro-fulfillment centers giving Gopuff an advantage in terms of delivery time.
Of course, nothing was certain, but the founders were confident in themselves and promoted themselves as the next big thing. Only, they lacked the same connections that tech startups in other areas, such as Silicon Valley, might have. That made it tough to find the right talent and backers, though they found local talent to fill the executive gaps.
The company also hired a group of developers to build its initial app, slowly growing. At that time, though, the company remained relatively small, requiring employees to work from one of two places: its headquarters in Philadelphia or an office in San Francisco. But all of that changed during the pandemic.
The start of Gopuff’s incredible growth came in 2019 when the company received an investment from SoftBank, a Japanese tech conglomerate. The conglomerate put $750 million into the company. The funding served as a launching pad, which put Gopuff in a solid position when the pandemic began.
The pandemic ended up being a period of major growth for Gopuff, starting with more investors stepping forward as they saw the opportunity for growth and success. More than anything, though, the massive demand for delivering all types of goods set the company up for success. That included groceries, snacks, and medical products.
Of course, Gopuff was not the only company to benefit from the shift in lifestyle many people faced, but its results stood out. Sales through the app soared, nearly doubling, and it maintained this pattern for quite some time. Unfortunately for Gopuff, that trend did not last, falling off in 2021 and this year.
But during the peak of its sales, the company’s founders did an impressive amount of fundraising, taking advantage of the interest in and demand for instant-delivery companies. In fact, they managed to go through three successful rounds of funding, which is what supported the ambitious expansion into major cities, including New York. They even started investing in pre-made meals and other goods specific to Gopuff.
At the same time, Gopuff started making moves to expand by pulling in talent from various companies, including the executives mentioned above from companies like Facebook and Airbnb. The plan was to expand every aspect of the company to compete with others in the space, ensuring its product development and engineering were up to the task ahead.
During the height of its growth in 2020, Gopuff held talks with various companies, including a potential partnership with Instacart, which eventually fell apart. While the companies disagreed over things, including how to share customer data. However, Uber proved more agreeable, and in 2021, both companies partnered to allow Uber users to share data with Gopuff.
Gopuff also acquired a few companies in 2021 to advance into Europe, offering its services in multiple cities, including London. This move comes after expansion into larger North American cities, with the founders intent on spreading Gopuff’s influence after continued growth and successful funding rounds.
The Height Before the Fall
Everything seemed to be going great for the company. Despite losing money, the expansion and recruitment of top talents set the company up for potential greatness. The founders pushed forward, clearly vying for ambitious heights. However, the founders’ dream of Gopuff becoming a $1 trillion business soon began to falter.
The founders, Gola and Ilishayev, grew the business to have around 15,000 employees. They even began to enjoy their success by purchasing their two adjacent houses in Miami. Following the purchase came a lavish lifestyle, including vehicles, a private jet, and partying. Moreover, the founders began hosting meetings in their homes, where everything was on display.
Simultaneously, Gopuff’s ventures began to stumble, particularly when it came to expansion. Several services ended, including ship-to-home services, and it ended up having to completely shelve its pharmacy operations. Suddenly, all the grand ambitions hit a block in the road, which has only worsened with the loss of people.
Now, Gopuff faces further trouble, though it is still pushing forward. The company recently launched its first restaurant brand, which is a pizza brand for delivery. Whether it will succeed or be another failed venture for the ambitious founders is unknown. Only time will tell.