Hot on the heels of Istanbul-founded rival Getir earlier this month raising $768 million (£585 million) at an $11.8 billion (£9 billion) valuation, app-based groceries rapid delivery start-up Gorillas is targeting a $5 billion (£4 billion) valuation as it raises $500 million (£381 million). Gorillas, which was only founded in 2020, was most recently valued at $3.1 billion (£2.36 billion) when it raised $1 billion last October.
Like Getir, founded by serial Turkish entrepreneur Nazim Salur, Gorillas also has a Turkish-born co-founder in Kağan Sümer. Sümer, however, grew up in Germany and started Gorillas in Berlin alongside co-founders Jörg Kattner and Ronny Shibley. Sümer and Shibley are currently the Gorillas chief executive and chief technology officer, while Kattner no longer has an active role in the company.
The new funding round will be managed by JP Morgan, with advisors from the U.S. banking giant hired to find backers willing to provide a cash injection of $500 million at a $5 billion valuation. Like other rapid-delivery services, Gorillas currently operates at a steep loss as it attempts to grow quickly and grab share of the competitive new market for speedy groceries delivery.
Gorillas currently operates in Germany, the Netherlands, the UK and France. Unlike many other companies in the sector, Gorillas delivery riders are employed on traditional labour contracts that offer paid vacations and health insurance. However, like its gig-economy rivals, the company has still been the target of staff complaints over poor working conditions.
The start-up was reportedly originally hoping to raise $1 billion through the upcoming investment round but has scaled its ambitions back to around half that sum. The company has around 200 dark stores from which it quickly packages groceries orders for delivery and recently agreed a trial with Tesco to deliver its products within 15 minutes. Deliveries will be made from Gorillas dark stores stocking Tesco products and fulfilled by the companies riders.
Rapid delivery apps are an alternative to the online deliveries services offered by most major supermarkets. The business model is to charge a flat fee for rapid delivery while supermarkets typically offer a delivery slot for the next day, or sometimes after 2 or 3 days, depending on capacity. Especially young professionals are willing to pay the premium for almost instant delivery offered by Gorillas and rivals like Getir.
Rising demand for rapid delivery services has seen venture capital and private equity pour into the sector over the past couple of years despite the sector’s fine margins and lack of profits. However, venture capital has shown a willingness to fund losses while rivals make a land grab for market share.
The high costs involved in competing in the market has already seen a first wave of consolidation. Getir snapped up UK rival Weezy last year while U.S. company Gopuff bought London-based Dija last August. The latter deal is believed to have taken place at a discount to Dija’s last valuation of $100 million.
Despite the sector’s initially rapid growth, doubts are starting to emerge over its sustainability. Analysts at Jefferies believe the roughly 30% premium shoppers have to pay to take advantage of rapid delivery services like Gorillas’ means the sector will remain just a small part of the overall groceries market. The analysts pointed to a lack of growth in use of the Gorillas and Getir apps over the found weeks to the middle of January.
Gorillas became the fastest ever European start-up to reach ‘unicorn’ status when valued at $1 billion a year ago, having only been founded a year earlier. Its service was even younger, having launched in May 2021.