Last week, fast grocery delivery company Getir announced it had raised a massive $768m Series E round at a $11.8bn valuation. Despite the war in Ukraine, a public market sell-off, slashed startup valuations and the end of most of the Covid-era lockdowns that pushed it to success in the first place, Getir is raising like it’s 2021.
Big-name investors like Mubadala, Tiger Global and Sequoia followed their earlier investment into the business while new investor Alpha Wave Global joined the round.
“Despite what is happening in financial markets, Getir’s fundamental play is looking pretty strong,” lead investor Rish Sethia from Mubadala tells Sifted.
But how did investors get to that $11.8bn valuation — up almost 60% from its June 2021 Series D valuation — when public markets have been bearish, with Deliveroo’s shares plummeting by ~50% and DoorDash’s by ~30% over the same period?
There are two possible explanations: either Getir’s numbers have run counter to what its public peers have delivered since June. Or, existing private investors have rallied to protect Getir and their earlier investment, attributing it a higher valuation than it would have achieved in the public market. (Spoiler: the answer appears to be a bit of both.)
Getir’s business model
The play of Getir — and other ultrafast delivery companies — is to sell huge quantities of groceries at relatively small margins. It aims to improve on established supermarkets’ slim profit margins of around 2-3% by employing fewer people, renting smaller and cheaper real estate, keeping less inventory and selling convenience goods at a premium price.
“Scale and high network density are key to unlocking some of the main efficiency levers and to building a moat,” Sethia tells Sifted. With more "dark" stores in place, a company can offer ever-faster delivery (often in less than 10 minutes) and bundle several customers' orders per trip. At scale, a business like Getir can also cut out wholesalers and go directly to suppliers (therefore improving its margins) and also offer goods under a private label (as many supermarkets already do to further improve margins).
👉 Read more: Peek inside one of Getir's dark stores
An investor in another quick commerce company tells Sifted that startups were ultimately aiming for “low double digit profits” and says that it would be “safe to assume” that Getir has strong unit economics in its first and most established market, Turkey, while it likely loses money per order in its newer markets, like the US.
According to a recent report by consulting firm Bain & Company: “European quick-commerce players will be looking at breakeven (at an earnings before interest and taxes level) if they can lift average order values to €30 (from about €20 today) and increase order volumes per dark store from 300-800 per day to more than 1,000.” At full potential, a dark store could look at Ebitda margins as high as 15-20%, according to Bain.
Nazim Salur, Getir’s founder, has previously stated that the business is profitable in Turkey. He did not comment on Getir’s unit economics to Sifted, but pointed out that Getir has seven years of experience eking out margins of ultrafast delivery — more than any other player.
These businesses are addictive… in a good way
Sounds like a lot of work? It is, but according to an industry insider, quick commerce businesses have SaaS-like retention and the data shows that a consumer will not only keep ordering, but order more and more over time. “These businesses are addictive… in a good way,” they added. “Customer satisfaction is extremely high.”
Salur wouldn’t comment on numbers published by Bloomberg that Getir expects a more than $1bn loss for 2022 (which would be equivalent to the amount raised in the Series E and much of the Series D combined). As the business continues to expand rapidly, overall profitability is likely a way off.
Getir’s performance appears strong relative to public peers
Like many private companies, Getir is cagey about sales and profitability figures. “Being a private company, we’d like to keep our numbers to ourselves,” Salur says. Hence it's difficult to tell exactly how it is performing relative to its public market peers like Deliveroo and DoorDash and its direct European competitors like Gorillas and Flink. There are some clues, however.
Getir’s expansion has continued at warp speed. Since its Series D, Getir has expanded to a further six countries (including the US, where it launched in November), opened in about 100 additional cities and created nearly 20,000 additional jobs.
The company's sales grew “by 4x” in 2021, according to Salur. This means it outperformed its listed competitors: Deliveroo "only" reported 2021 sales growth of 57%, while DoorDash achieved 69% growth.
Getir continues to outperform both Deliveroo and DoorDash
“Getir continues to outperform both Deliveroo and DoorDash,” says Sethia, and he should know: Mubadala is a big investor in DoorDash and understands the company and the delivery market in detail.
It also seems to be enjoying more success with its US operations than many competitors. Particularly in New York, competition has been fierce and several players — including Fridge No More, buyk and 1520 — have already ceased operations. European competitor Gorillas has scaled its US operations back to New York alone.
Salur says that Getir’s expansion to the US ”is going similarly to where the UK was at the same time, and we are very happy with that”. Today, Getir has 48 dark stores in the US and 130+ in the UK.
Investors are rallying round Getir
The latest fundraise was largely an inside round with Mubadala, Tiger Global, Sequoia, Base Partners and the Abu Dhabi Growth Fund following on their earlier investment. New investor Alpha Wave Global also has close links to existing investors: Rick Gerson, cofounder of Alpha Wave Global, is also the cofounder of Abu Dhabi Catalyst Partners, a joint venture of Mubadala and Alpha Wave.
“Even in the toughest market conditions there are some investors that are contrarians. They don’t act with the herd. I am glad that I have a number of investors that can see the value in a company like ours,” Salur tells Sifted.
At the time of the Series D, Sifted estimated that the business had been valued at a 8x–13x annualised sales multiple. Assuming Getir has maintained its 2021 growth rate that would suggest the sales multiple has been compressed to an approximate 4x-7x. “As you grow, the multiple shrinks a little,” Salur says. Indeed, sales multiples price in future growth, part of which Getir has delivered since the last valuation.
Investors were probably also willing to agree to the current valuation as it sets a reference price for Getir for any future IPO or funding round. Many investors acquired much of their equity at a much lower price and stand to make hefty returns, even if the current valuation proves too optimistic. Sequoia’s Michael Moritz, Base Partners and Tiger invested early — before Getir became a unicorn.
None of it would have happened if Getir’s performance wasn’t impressive. “Our investors believe that we will still be around when the dust settles,” says Salur. Sethia confirms this: “Getir has — we think — the strongest set of data points. The way they are executing is exceptional.” Still, this doesn’t seem to have enticed many new investors to invest at the current price.
This investment round is as much a bet on Getir’s ability to execute as it is on the fact that the category of ultrafast deliveries is here to stay and that the financial markets will ultimately value them. “We think we are at the beginning of a revolution in the huge grocery market which has been largely undisrupted in decades and that Getir is at the forefront of this revolution,” Sethia says.
The other ultrafast delivery companies looking to raise can just hope their investors take the same stance. At least one quick commerce investor thinks they will and tells Sifted that “this situation will separate the wheat from the chaff”. He believes that “the leading companies in their markets will continue to attract funding”.
Katja Staple writes about the business of startups for Sifted