The online food and grocery delivery space is seeing more consolidation. TechCrunch has learned and confirmed that GrubMarket, the startup that has quietly built a B2B empire in produce and grocery logistics and is now valued at $3.5 billion, has acquired Good Eggs, a once-feted fresh food delivery startup that has fallen on hard times recently.
The financial terms of the deal are not being disclosed, but sources with knowledge of the deal told TechCrunch that it was an all-stock transaction that valued Good Eggs slightly higher than its previous valuation of $22 million. The sources also said Good Eggs’ investors proactively approached GrubMarket looking for an exit.
TechCrunch has also confirmed that Good Eggs will be run by a new leader under GrubMarket: Keith Brewer, who was the COO of GrubMarket-owned Daylight Foods, will head Good Eggs. While a number of Good Eggs’ staff are expected to come over to GrubMarket, it’s not yet clear whether Rodrigo Arevalo, the Uber alum who is currently listed as Good Eggs’ CEO, will be staying on.
This is a pretty major turn for Good Eggs, and it serves as one more signal of how investors, who pumped hundreds of millions of dollars into perpetually loss-making startups, are now looking to draw a line under those activities and move on.
Good Eggs, for context, was valued as high as $365 million in November 2020, per PitchBook data (a round it announced in 2021), and had a vaunted investor list that included Benchmark, Index, Sequoia and Thrive, among many others. But as the COVID-19 tailwinds faded, it hit the rocks, and was eventually marked down a whopping 94% last year, landing it at that $22 million valuation.
GrubMarket, meanwhile, is now valued at around $3.5 billion and has raised over $560 million in funding from various backers that include Tiger Global. Its $3.5 billion valuation was reported by CNBC earlier this year.
GrubMarket initially competed with Good Eggs, but eventually started supplying the startup. The changing nature of that relationship may well provide a window into why some companies succeed in the grocery logistics and delivery space and some do not.
Both Good Eggs and GrubMarket launched, respectively in 2011 and 2014, with a focus on B2C, specifically delivering boxes of fresh food to consumers and businesses. But later, as Good Eggs kept its eyes on consumers, GrubMarket pivoted to concentrating on the B2B opportunity, and it scaled fast to work both with smaller grocers as well as major ones.
Whole Foods is GrubMarket’s biggest customer. It also supplies groceries and other items to major department stores like Walmart, as well as to other big names like Stanford University. With a pretty relentless eye on margins, unit economics, KPIs and long relationships with suppliers, GrubMarket has been profitable for some time.
“Profitability is in our DNA,” GrubMarket CEO and founder Mike Xu said. “We know how to get things profitable. It’s a systematic approach.”
Xu added that the company’s focus remains on B2B — it has made more than 80 acquisitions, most of which bolster that business — but acquisitions like Good Eggs underscore how it could use its economies of scale to revisit B2C. Still, Xu described the deal as “optimistic” rather than opportunistic.
Grocery and food delivery startups have faced a lot of ups and downs, and some categories have been hit pretty hard. Getir, a major player in “instant” grocery delivery that aggressively raised hundreds of millions of dollars (from some of the same backers as Good Eggs, as it happens), earlier this year cut its losses and retreated to its home market of Turkey. Other startups are struggling to raise at strong valuations while a few like GrubMarket are playing consolidator to improve their cost structures. U.S.-based Instacart is due to announce its second-quarter results today, which could prove a bellwether for other companies in the space.
