Gopuff Co-CEO Rafael Ilishayev sits down with Yahoo Finance's Julie Hyman to discuss the delivery startup, the outlook for tech and growth companies, the company's balance sheet, and Gopuff's plans to go public at some point.
JULIE HYMAN: GoPuff is among the companies gearing up for a rough ride in the markets. The grocery delivery specialist waiting for signs of improvement before answering the big question, when they might go public. I sat down with GoPuff co-CEO and co-founder Raphael Ilishayev at the Commerce Next conference last week. This is what he had to say about fundraising right now.
RAFAEL ILISHAYEV: We're looking at all aspects of the business, every area in the business, and saying, is this something that we need today? Is this supporting our profitable core? Because if you look at it on a cohort basis, all of our markets that are launched before 2018 are producing 15% EBITDA margins, fully baked.
So you have your core that's very, very profitable. That's your cash cow. You have your newer markets that are becoming profitable. So as the cohort ages, that cohort becomes more and more profitable. So it's like, do you add additional lines of business that will produce profit but many years out, or do you focus on your core, kind of get back to free cash flow, and then re-enter those growth opportunities but cash-losing opportunities maybe a year or a year and a half from now?
JULIE HYMAN: And also speaking of the changing environment, I imagine it's also very different in terms of raising funds for the business when you need to do so. We're finally-- the private markets seems sort of late to retrenching after the public market. So what does that look like? I mean, and I don't know what the public market, eventual evolution looks like for you and if what we're seeing right now changes that too.
RAFAEL ILISHAYEV: Yeah I think, unfortunately, there's some people that are a little bit out of touch with reality. They have five, six, seven months of cash left and operating like it's OK. And I'll be able to raise money in two quarters. Just, I don't see a practical world where that's going to happen.
So I think every single CEO needs to look at their balance sheet and say, this is what I have. This is what I have to work, with not rely on any outside capital, and then operate the business accordingly. I think that, fortunately for us, we built up a really healthy balance sheet. We have $2 billion of cash in the bank. And it allows us to have a lot of flexibility and a lot of leverage.
That being said, it's kind of been our story for the last nine years. We never needed investors. We positioned the business to always have a maximum amount of flexibility. And as a byproduct of that, we're really prepared for what's to come.
And I think founders are, in general, a little bit more paranoid in nature. And Karen and I tend to overcorrect a little bit sometimes. But I'd rather be overprepared and wrong than underprepared and disaster scenarios happening.
JULIE HYMAN: Yeah. And we're out of time. But that was also my coy way of asking if an IPO is in the future, which seems insane to ask while we're in a bear market. But I'm going to ask you anyway.
RAFAEL ILISHAYEV: Yeah. I think GoPuff will be a public company one day. The public markets are destroyed right now. I think that's the best way to put it, a lot of volatility. So we have the ultimate flexibility to wait. We have enough cash to wait for years.
So when the markets start to rebound and start to look better, we'll obviously examine that situation and prepare ourselves for what the next steps look like.
JULIE HYMAN: So interesting to get a little insight into the mindset of an e-commerce company right now. We were just talking about some of the other ones out there and how they're faring, from the Amazons of the world on the one hand, Chewy on another side of things, and then this so-called instant delivery, which is within a half-hour window. That's where they sit. So they're definitely buckling up for some tough times here.
BRAD SMITH: Started out as hookah delivery. I mean, these are some Drexel grads. So you know I got to give that a shout-out. That's my alma mater. So go Dragons out there, unless you're coming for my student tuition.
But anyway, I think at the end of the day for what they're looking across in terms of this environment right now on the public market front, it just doesn't seem like, in the environment we're seeing-- even some of the de-SPAC processes being canceled due to current market conditions. For companies who have been capitalized to this point in time, sure, some of their investors are going to be tapping on the door and asking, hey, so how much more capital do you need to make this happen through a market or an economic downturn over this immediate period of time? And then even furthermore, when do you think will actually be able to realize some of that investment in terms of an equity market entry as well?
BRIAN SOZZI: Yeah, this bear market has definitely spread to private markets. Look at GoPuff. But look at Klarna. Klarna has been a complete blow-up the past two months, as you've seen this pullback in the markets. How are they going to raise capital?
But I thought his comments on companies that he knows only sitting on five to seven months of cash, I don't know if that is an opportunistic thing for a GoPuff. Do they use their cash, go buy out these companies? It's unclear. But that's alarming. That's an alarming comment.
JULIE HYMAN: It didn't feel that way right now. They've already been pretty acquisitive. They bought some liquor chains, for example, in various areas of the country in order to get access to those liquor licenses. And booze is one of the biggest parts of their business. It's also traditionally a business that tends to be more recession-resistant, that people buy alcohol no matter the economic conditions.
That said, some of those comments also seemed, sort of pointed at-- there was a recent report in "The Information" from early may that talked about GoPuff's perhaps tenuous cash position or that they had high cash burn. So he seemed to be sort of addressing that.
I should also mention, GoPuff retrenched earlier this year, earlier than a lot of other tech competitors or e-commerce competitors did. They closed some of their mini-- so they own the whole chain. It's not like an Instacart where you go to a store and shop, they have shoppers. They own little what they call mini-fulfillment centers. They closed some of those centers quite early in the year to try to prepare for what was coming.
BRIAN SOZZI: Amazon's been doing that too. They are now focused on curtailing their distribution space as well. So it's not just GoPuff.
JULIE HYMAN: Yeah.
BRAD SMITH: All right.