Unveiling Getir: Exploring the Impact of Rapid Delivery Sector Crash on Down Round

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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.

The pandemic witnessed the emergence of ultrafast grocery delivery start-ups. From 2020 to 2021, these companies collectively raised $6.5 billion, promising to bring provisions to customers’ doorsteps in 15 minutes or less, as reported by PitchBook.

However, the escalation of interest rates has caused a decline in venture capital investments. Additionally, consumers have become inclined to fetch their own groceries rather than rely on delivery services. As a result, companies, especially those experiencing losses, must accept lower valuations to secure new funds, or else face potential failure.

Getir exemplifies the challenges confronted by this sector. The Turkey-based company, previously valued at $11.8 billion just a year and a half ago, is currently in discussions to raise new funds with a valuation of only $2.5 billion.

The economic viability of ultrafast delivery has always been uncertain. Companies in this space heavily rely on venture capital funding to establish their market presence through distinctive branding, aggressive marketing, and generous discounts. Their ability to achieve swift deliveries is attributed to their employment of small localized warehouses, a fleet of couriers, and a limited selection of essential household items. The initial belief was that ultrafast delivery would be easier to scale and financially sustainable in densely populated urban areas.

However, this assumption has proven to be false. Many of Getir’s competitors in the United States have either been acquired or shut down. To minimize its cash burn, Getir has ceased operations in Spain, Italy, Portugal, and France. Currently, the company is active in five markets: Turkey, the United Kingdom, Germany, the Netherlands, and the United States.

The significant drop in Getir’s valuation, a decline of 80 percent, appears justified. DoorDash, a prominent US food delivery app, and UK-based Ocado have also experienced a similar decline of around 70 percent from their peak valuations in 2021.

All of these developments do not bode well for the upcoming initial public offering (IPO) of Instacart, a US grocery delivery service. The IPO is expected to occur as early as next week, but it is unlikely that shares will generate significant demand.