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Gopuff Is Close to Raising $1 Billion With No IPO in Sight

(Bloomberg) -- Gopuff is near to closing a $1 billion funding round and is cutting hundreds of jobs, steps meant to bolster the delivery startup’s financial cushion as it embarks on a new global strategy and steers clear of the volatile public markets.

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The latest investment is being led by Guggenheim Partners and will come in the form of a convertible note, according to people familiar with the matter. The additional capital would add to Gopuff’s current cash position of $2 billion. Gopuff was valued at $15 billion last July. A Guggenheim spokesperson didn’t immediately respond to a request for comment.

Gopuff had been in discussions with investment banks about a potential initial public offering that at one point was envisioned for as soon as the second half of the year, Bloomberg has reported. But some big-name startups that were expected to go public early this year have slowed their rush, preferring to sit out big swings in tech stocks. The recent market downturn, driven by concerns about rising interest rates and inflation, has made it harder for some older startups to raise money, with late-stage venture capital funds pulling back, a senior executive at Sequoia Capital told Bloomberg recently.

A person familiar with Gopuff’s plans said the company has no intention of raising capital through a public offering in the near term, due to market conditions, and hasn’t filed paperwork to initiate the process. A spokesperson for Gopuff declined to comment on the IPO plans.

Founded in 2013 by college students in Philadelphia who wanted to make it easier to get convenience items delivered, Gopuff expanded quickly and now operates in more than 1,200 cities across four countries. The company runs a network of warehouses stocked with inventory it purchases, and uses contractors to deliver thousands of products, from ice cream to cleaning sprays, for a flat fee. It’s backed by firms including Accel, Blackstone Inc., Baillie Gifford, D1 Capital Partners and SoftBank Group Corp.’s Vision Fund.

In a memo to staff on Thursday, the company said it’s now time to enter the next chapter, “with a new global business model and corresponding investment priorities.” As part of that strategy, Gopuff is cutting 3% of its staff from a global workforce of more than 15,000 across all levels, including senior leadership. The Information reported earlier on the job cuts.

To support the global vision, Gopuff outlined a new organizational structure, adding a new senior vice president of North America.

Like delivery peers DoorDash Inc. and Uber Technologies Inc., Gopuff’s blistering pace of growth was boosted by pandemic-era enthusiasm for commerce that doesn’t involve leaving the house. Gopuff, whose official name is GoBrands Inc., generated just under $2 billion in revenue in 2021 and order volume grew 70% compared with 2020.

The market for ever-faster delivery of nearly anything has gotten fiercely competitive in recent months as a raft of young, VC-backed startups like Germany’s Gorillas Technologies GmbH, Jokr and Turkey’s Getir have flooded markets like New York, promising goods in as little as 15 minutes.

But investors have grown wary of startups’ ability to convert the boom in quick-commerce from a fad to a profitable venture. Earlier this month the Russia-backed rapid delivery app Buyk Corp., which launched in New York last year, filed for bankruptcy after fallout from Russia’s invasion of Ukraine restricted the startup’s access to funding. Another startup, Fridge No More, shut down its operations after talks with DoorDash to buy some of its businesses fell through.

Last week, grocery-delivery giant Instacart Inc. slashed its valuation by almost 40% to better align itself with the public markets, a move it said would help employees and new recruits by giving their stock option awards more room to rise when investor sentiment turns positive again.

As one of the more mature startups in the sector, Gopuff has worked to improve its profit margins and is seeing more than $4 in profit per order, according to the memo.

“Our ethos has always been balancing scaling of the business with fiscal responsibility and long-term value creation; and now, as we look ahead, we are even further increasing that determination,” the company said.

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