GoBrands, the Philadelphia-based delivery company that wants its GoPuff warehouse and delivery service to replace student runs to Wawa, beer and CBD stores, has raised $750 million plus a pledge of $250 million more if it does well this year, according to two people close to the company.
The investment round was led by the Japanese-run, Saudi Arabia government-funded Softbank Vision Fund, the people said.
That kind of money would enable GoPuff to accelerate its growth against rivals including other venture-backed startups, as well as giants such as Amazon Prime and Uber Eats.
The billion-dollar bet by Softbank Vision and another venture capital firm, Accel Partners, was first reported Friday by The Information, a San Francisco-based, subscriber-funded news service, citing unnamed sources.
GoBrands did not offer any comments, and SoftBank has not publicly named GoBrands among its investments.
Accel, a Silicon Valley firm that backed GoBrands in a smaller, earlier funding round, has a history with delivery start-ups: Accel also backed Bucknell grad Marc Lore’s Quidsi delivery service, which was purchased by Amazon in 2010 for more than $500 million, and Lore’s warehouse-delivery service Jet.com, bought by Walmart in 2016 for more than $3 billion.
That build-local, sell-to-giants model, if successful, could make GoPuff’s investors rich alongside its founders, Drexel grads Yakir Gola and Rafael Ilishayev.
The Softbank and Accel-led investment would make GoBrands among the best-funded Philly software startups in recent history. SoftBank Vision is also an investor in Fanatics, Conshohocken-based investor Michael Rubin’s sports-gear supplier, among many other retail-tech firms.
For SoftBank, which is used to betting billions, going heavy on GoBrands looks like a hedge on earlier bets: SoftBank has also invested in GoPuff’s food service rival DoorDash, notes Bob Moul, a veteran Philadelphia area tech CEO (he now heads data-intelligence start-up Circonus) and a close observer of the Philly venture-capital scene.
Along with successful investments such as China’s AliBaba and promising ones such as Uber and Fanatics, SoftBank has made some famously bad bets, writing down $4.6 billion in valuation losses last year on office-sublet company WeWork, now called The We Company.
I talked to a partner at one big East Coast venture capital firm, known for its e-commerce investments, who was visited by GoPuff during its last fundraising but decided to pass.
“We were impressed,” he told me. “We liked these two young guys, though they were inexperienced.” He noted Anthony Bucci, another Drexel grad and cofounder of Philadelphia-based online-motorcycle-gear supplier RevZilla, was an early supporter, which he found encouraging. So was Tom Valios, chief executive of Five Below, the successful Philadelphia dollar-store chain for young teenagers.
But the partner found GoBrands’ proposed investment price too ambitious.
“The valuation they wanted was 8 to 12 times revenues,” he marveled. “They would be a unicorn” — a company that turned millions into a billion, fast.
“There was a gigantic of execution risk,” he added. “For a so-called ‘non-brick-and-mortar’ company, they wanted to spend a lot of money on warehouses. To take over Wawa’s business, you need the kind of equipment Wawa and its suppliers have and that gets expensive.”
In December, yet another delivery rival, Snackpass, started by recent Yale grad Andrew Tan, raised $21 million from Andrew Chen, a partner at software-ventures pioneer Andreessen Horowitz. Chen was joined by Silicon Valley stalwarts Y Combinator, General Catalyst and Inspired Capital — and Philadelphia-New York-Silicon Valley-based First Round Capital, whose chairman, Josh Kopleman, once expressed regrets at not buying into GoPuff, but clearly feels its rivals are still worth buying, too. (Kopelman is chairman of the board that oversees the Inquirer.)
The company delivers near its local centers for $1.95, plus tips employees say average around $3, which makes the service viable in densely-populated locations like college apartments — when the company can find enough delivery people.
For all its success raising private money, GoPuff has not hesitated to play Pennsylvania against New Jersey in its corporate hunt for taxpayer subsidies. In 2018 the company was offered $400,000 in state aid and $2.5 million in cheap city-backed loans to help develop its new headquarters at 12th and Spring Garden streets.
That same year it accepted up to $39 million in reduced taxes over 10 years for its planned $43 million, 600-worker, 300,000 square foot warehouse and tech center near Rowan University in Glassboro.
The application for the Glassboro project said GoBrands needed the tax break to make the South Jersey site competitive with a cheaper site near Lansdale, Pa.
The company told New Jersey when it applied in 2018 that it expected the plant would open late last year and employ 602 by Sept. 1, but the project remains in the planning stages.
Local news accounts across the U.S. show that GoPuff has also made plans — since Softbank committed — to develop smaller delivery centers of around 6,000 square feet each at the Aramingo Village shopping center in Port Richmond (where it also plans a stop-and-go style beer and takeout store); at sites in northeast and southeast San Antonio, Tex.; in Henrico and Harrisonburg, Va.; Tucson, Ariz.; Knoxville, Tenn.; Tulsa, Okla.; and Tuscaloosa, Ala., among other college towns and cities. A real estate source told me GoPuff could end up passing on some smaller towns it targeted if conditions aren’t right.
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