Coronavirus home orders have sparked unprecedented demand for food delivery around the world. Investors are now clamoring to bet on promising players on the pitch.
This includes DST Global, the investment company led by Russian billionaire Yuri Milner. Most recently, he poured $ 35 million into Weee!, A Californian startup that delivers Asian groceries like fresh kimchi and Japanese desserts from its warehouses to major U.S. cities. The funding increased the startup's total increase by five years. since inception to over $ 100 million.
Weee! refused to share its post-money valuation, but the figure is likely to exceed $ 500 million as it is widely known that DST Global generally does not support companies whose valuation is less than $ 500 million.
Online grocery is a capital-intensive business with low profit margins, so it's no surprise to see many contenders, both in China and the US, operating in the red. Against all odds, Weee! it became profitable earlier this year and posted positive cash flow.
This means that the startup was in no rush to raise funds, likely giving it more bargaining power in terms of negotiating with a longtime investor like DST Global, whose portfolio includes Spotify, Twitter, Airbnb, Slack, Didi, Gojek, to name a few.
Weee! certainly corresponds to DST Global's investment objective as a high-growth startup. In June, the company experienced 700% year-over-year revenue growth and was on the verge of generating revenue of less than hundreds of millions of dollars in 2020, he told ProWellTech at the time.
Since the United States starts closing lockdowns and people return to supermarkets, some grocery delivery services have seen their revenue growth slow. Weee !, however, is currently growing 15-20% higher than its March peak. Liu explained that the sustained boom stems from product differentiation of service: Asian specialties that can't even be found in Chinatown.
"People don't want to pay extra though [an online grocery] it only provides convenient delivery but no product differentiation, "said Han Shen, founding partner of iFly.vc, a California-based fund that backed Weee! in its Series A round.
Also, Weee! tries to simplify every phase of its operations, from procurement of products, to warehouse management, to staff assignment, to door-to-door delivery. The result is zero food waste thanks to the rapid rotation of stocks.
"There's no secret tactic we can't talk about, nothing more than achieving efficiency throughout the entire process," Shen noted.
Meanwhile, Weee! works to keep prices low by cultivating direct relationships with suppliers such as local farms and opting for next day delivery rather than the more expensive standard of 30 minutes expected in China, where it grew. Earlier this year, Tom Dillon, former Netflix chief operations officer, joined the board to help strengthen Weee! 'S operational efficiency.
With the new proceeds, the Asian e-grocer hopes to hire new talent and expand its delivery service from eight key regions to 13-14 U.S. cities by the end of this year.