GrubMarket Raises $120M at $1B+ Valuation - Food Supply Chain Disruption

The Evolution of Online Food Supply Chains

When considering “online food delivery” services, many immediately envision companies like Uber Eats, Instacart, and Getir. However, a startup is currently redefining a different segment of the market – the crucial supply chain that supports larger food distribution networks – and has recently secured substantial funding to fuel its expansion.

GrubMarket’s Series E Funding

GrubMarket, a provider of software and services designed to streamline connections and manage relationships between food suppliers and their clientele, has successfully raised $120 million in a Series E funding round.

This investment comes from a diverse group of investors. Liberty Street Funds, Walleye Capital, Japan Post Capital, Joseph Stone Capital, Pegasus Tech Ventures, and Tech Pioneers Fund are among the new backers. They join existing investors including Celtic House Asia Partners, INP Capital, Reimagined Ventures, Moringa Capital Management, and other unnamed participants.

Strong Financial Performance

Mike Xu, founder and CEO of GrubMarket, reports that the company is currently experiencing significant profitability. The company has achieved a $1 billion annualized run-rate, demonstrating 300% revenue growth year-over-year, with certain markets, such as New York, exhibiting even faster expansion – growing from under $10 million ARR to over $100 million.

Geographic Reach and Valuation

Currently operating in Arizona, California, Connecticut, Georgia, Michigan, New York, New Jersey, Missouri, Massachusetts, Oregon, Pennsylvania, Texas, and Washington, GrubMarket maintains a network of approximately 40 warehouses nationwide. The company’s pre-money valuation exceeded $1 billion, and it intends to further expand its reach, both geographically and technologically.

A Unique Market Position

“We remain the first mover in this space,” Xu stated. “No other company is undertaking supply chain consolidation to the extent that we are. Our strategy centers on consolidating the American food supply chain through software technologies, while simultaneously identifying optimal solutions.”

GrubMarket’s valuation has more than doubled since October 2020, when it secured $60 million at a $500 million post-money valuation.

Future Plans: Potential IPO

Xu indicated that the company is tentatively planning to file paperwork for an Initial Public Offering (IPO) by summer 2022.

From Farm-to-Table to B2B2C

GrubMarket initially emerged as a company focused on improving the efficiency of farm-to-table services. Recognizing growing consumer demand for higher-quality, traceable food, it developed a platform to connect producers with consumers, restaurants, and grocery stores. Notably, Whole Foods is a major customer, utilizing GrubMarket for produce supply in specific U.S. regions.

While the pandemic initially boosted consumer-facing demand, GrubMarket’s primary focus has shifted to a B2B2C model, serving businesses that then cater to consumers. Xu notes a considerable decrease in direct consumer demand compared to the previous year.

Shifting Consumer Trends

“The reopening of restaurants has likely led to increased dining out and reduced at-home consumption,” Xu explained. “Consumers are also returning to physical grocery stores, lessening their interest in online raw ingredient purchases. I believe many food tech companies are observing similar trends, and the B2C sector is likely to experience slower growth.”

Consolidation Through Technology

GrubMarket differentiates itself by not only acting as an intermediary between producers and buyers but also by leveraging technology to consolidate a historically fragmented and regionalized market.

Strategic Acquisitions

Over the past three years, GrubMarket has acquired over 40 companies. These acquisitions have served both to expand its geographic footprint – including 10 acquisitions in the Los Angeles area – and to strengthen its technological capabilities.

Expanding Technological Capabilities

Acquisitions have included Farmigo, a former Disrupt Battlefield contender that transitioned into a software provider for CSAs, and Pacific Farm Management, offering software for farm business management.

GrubMarket’s in-house software, WholesaleWare, a cloud-based service for food producers, experienced a 3,500% sales increase last year and currently manages over $4 billion in wholesale and retail activity across the U.S. and Canada.

Focus on the Supply Chain

While opportunities exist to expand services for purchasing customers, GrubMarket is concentrating on the often-overlooked aspect of the food supply chain – the suppliers themselves.

“My focus is on the food supply chain,” Xu emphasized. “Operators in this sector frequently lack access to software and e-commerce technology. We offer more than a simple online ordering system, providing comprehensive support for inventory management, pricing, customer relations, and even HR for wholesalers and distributors.” The company also plans to explore connected hardware, such as robotics for item handling.

Investor Confidence

“GrubMarket has built a profitable, high-growth business underpinned by its best-in-class technology platform that’s reinventing how businesses access healthy, fresh foods,” stated Jack Litowitz, director of strategic investments at Reimagined Ventures. “We’re proud to support GrubMarket as it continues to expand into new regions and grow its WholesaleWare 2.0 software platform.”

Bill Reichert, partner at Pegasus Tech Ventures, added, “GrubMarket is transforming the trillion-dollar food distribution industry with unprecedented speed by implementing advanced digital solutions and operational discipline. The company’s scale, growth, and profitability are extraordinarily impressive. Pegasus is delighted and honored to be part of GrubMarket’s exciting journey ahead.”

Updated to correct a couple of erroneous references to GrubHub instead of GrubMarket.