SoftBank-Backed Delivery Startup Gopuff Closing 76 Warehouses
In a letter to private investors initially reported by Bloomberg and viewed by Bisnow, Gopuff co-founders and co-CEOs Yakir Gola and Rafael Ilishayev announced that the company is closing 76 U.S. warehouses and laying off 10% of its global workforce. The moves come as part of a broader strategy change to "take us back to our roots of keeping profitability at the core of every decision," Gola and Ilishayev said in the letter.
"We built this company focusing on profitability first and were profitable for the first three years," the letter read. "This was only possible because we operated with a 'nail it before scaling' approach, a cultural discipline that positioned us for long-term success and sustainability."
The letter delineated the past 18 months as a period where rapid global expansion became Gopuff's chief priority — the exact length of time since venture capital behemoth SoftBank Group led a $1B fundraising round into the company through its Vision Fund. Gopuff's most recent capital raise last July, led by Blackstone Group, pegged the company's valuation at $15B.
Gopuff has nearly doubled its footprint of warehouses to 600 in the past 12 months, with each opening coming at an average cost of $250K, Bloomberg reports. Whereas Gopuff plans to "double down" on its UK business, it will re-evaluate the other foreign markets where it operates, which include cities in France and Spain, the letter read.
Gopuff is far from alone as a startup that seemingly focused on growth at all costs soon after receiving a major investment from SoftBank or its Vision Fund, backed by the sovereign wealth funds of Saudi Arabia and Abu Dhabi. Several SoftBank-backed startups whose valuations collapsed upon going public even before the current financial environment saw valuation drops among public and private companies alike. SoftBank signaled its intent in April to be more judicious with its investment strategy.
Gola and Ilishayev said they moved quickly to cut costs after economic conditions took a turn for the worse earlier this year. In March, the company laid off 3% of its employees and postponed its plans for an initial public offering indefinitely.
Gopuff will expand the delivery zones of warehouses closest to those being shuttered so that 95% of customers will remain within the company's delivery radius, a Gopuff spokesperson told Bisnow. The spokesperson declined to comment on the record or disclose the locations of the warehouses to be closed, though Bloomberg reports that five of the 24 warehouses Gopuff has established in New York are on the chopping block.
The company's founders stressed in their letter to investors that the company has sufficient cash for four years of operation, and Bloomberg reports that its cash reserves totaled $2B as recently as March. For markets in which it has operated long enough to consider itself established, Gopuff turns a profit, the letter said.