Food delivery is seeing more consolidation: GrubMarket snaps up FreshGoGo

by with No Comment Tech

Shanghai style soup dumplings served steamed in restaurant in Chinatown.

Image Credits: K1 Photography (opens in a new window) / Getty Images

GrubMarket, the $3.6 billion food delivery and supply chain startup backed by Tiger Global, BlackRock and nearly 100 other investors, has snapped up another food delivery startup on its consolidation march: It is acquiring FreshGoGo, a New York-based, B2C platform selling Asian groceries and ready-made dishes.

Terms of the deal are not being disclosed, but we understand that the deal involves a mix of cash and shares in GrubMarket. FreshGoGo had raised around $15 million from individual investors, according to GrubMarket. FreshGoGo founder Jianbing Duan will stay with the company and continue running the business.

The acquisition is coming close on the heels of another deal: Earlier in August, GrubMarket acquired Good Eggs for an undisclosed sum. 

FreshGoGo has around 210,000 customers across 27 states, and generates annual revenue of about $30 million from sales of groceries, “food court” ready-made meals and other prepared and off-the-shelf food products. The company is not profitable.

The deal underscores the ongoing evolution of the food logistics and delivery space. Startups founded just before or during the COVID-19 pandemic found themselves riding high as much of the world stayed indoors and wanted to spice up eating at home. These startups built apps to facilitate ordering, supply-chain management and delivery logistics.

Typically, these startups were built as three-sided marketplaces involving food suppliers, the people carrying out the deliveries and end-customers buying food. Collectively, they raised hundreds of millions of dollars in venture funding as investors hungrily eyed booming consumer interest. And the startups took the term sheets to compete for business with discounts, free promotions and splashy ad campaigns.

By 2022, however, things had changed. Not only were people returning to pre-pandemic consumption patterns (and going outside again), but the economy was shifting. Inflation and unemployment were on the rise, putting a lot of pressure on businesses selling nice-to-haves. Tech companies focused on delivery services saw growth plateau or even decline. 

FreshGoGo had similar problems, but it appears to have had some other issues, too: This story from 2022 details the company’s struggles to pay vendors — those selling food on the platform — on time.

GrubMarket, based out of Silicon Valley and incubated at Y Combinator, started off with fresh produce, specifically positioning itself as the digital interface for fruit and vegetable growers who were looking for more efficient ways to connect with retailers and consumers. It eventually focused just on retailers and became a key supplier to Whole Foods and other well-known department stores and grocers. 

It has raised over $600 million to date, according to PitchBook. And while a number of smaller companies struggled with unit economics, GrubMarket grew and leveraged its newfound heft to acquire those smaller companies. Its aim, said CEO and founder Mike Xu in an interview, is to fix what isn’t working in otherwise promising ventures. For example, in the case of Good Eggs, Xu said that startup is now about to turn a profit after struggling for years. 

FreshGoGo is quite a turn away from Good Eggs, a high-profile Bay Area favorite, and today’s deal points to how GrubMarket is exploring the longer tail of food distribution opportunities. Other cuisine-specific acquisitions GrubMarket has made cover Korean, South American, Caribbean and Greek food.

Duan founded FreshGoGo in 2017 in New York, tapping into the wide network of independent food sellers and food courts frequented by Chinese immigrant communities and adventurous foodies on the search for authentic food that can be hard to find in most grocery stores or mainstream Asian restaurants. 

FreshGoGo’s premise was to bring those products to more people, and it built a wider logistics and online commerce business around that — it claimed that its average basket size was more than $100. It was a simple premise, but it seems it was challenging to execute, judging by the reports of missed supplier payments and the stagnating growth that led to the company’s sale to GrubMarket.

Although GrubMarket continues to be focused mainly on B2B, it will continue to pick up B2C companies opportunistically, as it did with Good Eggs and FreshGoGo, Xu said. If the company can migrate more operations to its own platforms, GrubMarket and the companies it’s buying will both get better economies of scale, Xu said.

“We stay opportunistic about B2C acquisitions for those B2C companies who are solid financially and capital-efficient,” he added, “which either have been breakeven/profitable, or can be turned to breakeven or profitable quickly after our takeover.”

Windfall Bio is seeing strong demand for its methane-eating microbe startup

by with No Comment Tech

Windfall Bio, methane, startups, venture capital

Image Credits: Oscar Wong / Getty Images

When Josh Silverman started shopping around the idea for his methane-eating microbe startup, Windfall Bio, eight years ago, the market just wasn’t ready. Nobody cared about methane, he said. Companies were instead focused on lowering their carbon emissions. But a few years later, the market is starting to come around.

Menlo Park–based Windfall Bio raised a $28 million Series A round to expand its commercialization efforts. The round was led by Prelude Ventures with participation from Amazon’s Climate Pledge Fund, Incite Ventures and Positive Ventures, among others, as well as existing investors, including Mayfield.

Windfall works with industries that produce large levels of methane, such as agriculture, oil and gas, and landfills. The startup supplies methane-eating microbes that absorb methane emissions, turning them into fertilizer. Companies can either utilize the fertilizer themselves, if they are in the agriculture sector, or they can sell it as a revenue stream.

“We think there is a big opportunity to leverage this natural ecosystem that gives us a low-cost solution without needing massive investments in capital like we are seeing for these other carbon capture technologies,” Silverman said.

While it took a couple of years to really get investors and companies on board, Silverman said that since the Windfall raised its seed round last year and emerged from stealth in March 2023, demand has been high.

“We have had a massive influx from all continents and all verticals; huge amounts of excitement,” Silverman said. “It’s profitable for everybody regardless of the industry. Everyone wants to reduce their carbon footprint, and they want to do it in a way where they make money and there aren’t many solutions.”

Silverman says that carbon capture was the only focus for so long because once carbon is in the atmosphere, it lasts forever, compared to methane’s 10- to 12-year lifespan. A few decades ago, when people thought about climate change, they were looking for more long-term solutions. But now that the impacts of climate change are both more clear and worsening, people are waking up to the need for both short-term and long-term solutions.

“We have literally missed every single climate target we have put in place,” Silverman said. Not a single G20 country has the policies needed in place for it to reach the Paris Agreement’s emission-reduction targets, for example. “If all you are doing is looking out in the future and not doing the day to day, you miss those targets and miss what is right in front of you. We need to manage the short-term climate factors, or we won’t be around to deal with the long-term.”

The lack of attention to methane is also surprising because methane actually can create a better ROI for companies than their carbon-reduction efforts.

Carbon is waste, which means that when companies capture it, they do so largely just to get rid of it, as opposed to turning it into something else. In comparison, methane is energy, which means it can be captured and repurposed much easier than carbon. Essentially, companies can reduce carbon for potential cost savings down the road, or a super legit carbon credit, while focusing on methane can actually make them money if they work with a company like Windfall.

This deal also stood out to me because Windfall lies within a growing category of startups focused on mitigating the climate issues of today and not just the ones down the road. While it is good for companies to be focused on mitigating the long-term impacts of climate change or trying to prevent future climate-induced events, we need solutions now.

It reminded me of Convective Capital, a venture fund I’ve written about before that’s dedicated to wildfire tech. It’s not dedicated to the tech that helps prevent them but rather tech that helps society adapt to the impact of increased wildfires now. Firm founder Bill Clerico told TechCrunch in 2022 that while it’s great to build long-term solutions, those mean nothing if your home is in danger from wildfires this summer.

Silverman said the market is still in the early innings of coming around to the potential benefits of investing in methane-reduction technology. But progress is good, and though he might be biased, Silverman is happy to see funding heading to a climate company that isn’t another carbon credit startup. I agree with him there.

“It was a long road getting here, lots of years of zero traction,” Silverman said. “Now that the traction is there and there aren’t very many people working in this area, there aren’t that many competitors. We are the best of the very few options. As I’ve said, ‘in my land of the blind, the one-eyed man is king.’”