Getir: down round highlights rapid delivery sector crash

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Ultrafast grocery delivery start-ups burst on to the scene during the pandemic. Between 2020 and 2021, companies promising to bring provisions to your doorstep in 15 minutes or less collectively raised $6.5bn, according to PitchBook.

However, sharply higher interest rates have dried up the flow of venture capital. Consumers also appeared to have cast aside their inner sloths to fetch their own litre of milk. Companies, particularly lossmaking ones, now have to accept lower valuations to raise new funds, or risk flaming out.

Getir underscores the challenges facing the sector. The Turkey-based group, which boasted a valuation of $11.8bn just 18 months ago, is in talks to raise new funds in a deal that would value it at just $2.5bn. 

The economics behind ultrafast delivery were always dubious. Companies in this space all rely on buckets of cash provided by VCs to snatch market share with flashy branding, aggressive marketing and steep discounts. Their rapid delivery speed is accomplished through a combination of small localised warehouses, an army of couriers and a limited selection of household staples. The bet was that, in densely populated cities, ultrafast delivery would be easier to scale and more financially feasible to pull off. 

That proved not to be the case. In the US, many of Getir’s rivals have been sold or shut down. To reduce its own cash burn, Getir has closed up shop in Spain, Italy, Portugal and France. It now has operations in just five markets: Turkey, the UK, Germany, the Netherlands and the US. 

The 80 per cent climbdown in Getir’s valuation does not look overdone. Shares in DoorDash, the US food delivery app, and UK-based Ocado are both down about 70 per cent from their 2021 peaks.

All this bodes poorly for Instacart’s upcoming initial public offering. The US grocery delivery service could go public as soon as next week. Do not expect shares to go flying off the shelves.