Subscribe to receive updates on the Technology sector for free. Every morning, we will send you a myFT Daily Digest email summarizing the latest news in the Technology industry.
The cost of delivering a packet of Hobnobs from a corner shop has risen significantly in comparison to the cost of sending Americans into space. While this may seem like a silly comparison, it highlights the rapid growth and investment in grocery delivery startups like Getir and Gopuff. According to Morgan Stanley data, these startups have raised over $10 billion from investors, making them a case study for future investors in the growth-at-any-price era.
So, what can we learn from this? Firstly, it is not easy to create a demand for a product or service overnight. Morgan Stanley analyzes Google Trends and app downloads data to measure consumer interest. They found that searches for delivery discounts decreased by 90% after global venture capital deployment reached its peak. Essentially, a large amount of venture capital money was invested in advertising and promotions to create a rapid delivery market. However, once interest rates rose and funding decreased, the market returned to its initial state. It is unclear whether this decline was due to failed scalability of startups or increased competition from established operators like Uber and Deliveroo. Regardless, this situation demonstrates that not all business ideas are successful, regardless of the amount of funding behind them.
Secondly, as long as there is cash flow, the reality of the situation may not matter to unicorn companies. Morgan Stanley finds that in the rapid delivery industry, all metrics have decreased significantly, except for valuations. App downloads, discount searches, and new funding rounds have all dropped by approximately 90%, but primary equity rounds have only declined by 14% on average. This may be due to the lack of down rounds in the sector. Although the overall valuation of the sector has decreased from its peak of $35 billion to around $30 billion, eight out of the 11 companies in Morgan Stanley’s data still have all-time high valuations. However, this fantasy does not hold true in other sectors. Private delivery companies have seen an average decrease of 79% in fund marks, and secondary market trading typically occurs at a 71% discount to the last formal funding round. Publicly traded food delivery companies have also seen their share prices fall by 60 to 90% over the same period. Therefore, the discounts applied to the sector’s valuation seem realistic.
Morgan Stanley concludes by stating that although there may be some positive signs in private funding, the unicorn valuations have not experienced a true reset. The discrepancies between post-money valuations and secondary pricing highlight the challenges faced by the rapid grocery delivery industry. It is clear that the initial hype surrounding this market has left an aftermath that needs to be addressed.
*Note: The cost comparison between delivering Hobnobs and putting Americans into space is made to emphasize the significant rise in delivery costs.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
