Glovo Secures $528 Million in Series F Funding

Following Deliveroo’s recent fundraising exceeding $2 billion prior to its London Stock Exchange debut, Glovo, a Spanish startup boasting 10 million users, has successfully closed a substantial funding round. The company, which facilitates deliveries of restaurant meals, groceries, and other goods in collaboration with local businesses, has secured a Series F investment of $528 million (€450 million).

Addressing Delivery Margins and Expanding Q-Commerce

Glovo is strategically focused on achieving market leadership within the 20 European countries where it currently operates. To counteract the typically slim, or even negative, profit margins common among delivery services, the company is prioritizing the expansion of its “q-commerce” service. This involves delivering items to urban customers within a timeframe of 30 minutes or less.

The newly acquired capital will be allocated to bolstering this strategy. This includes the recruitment of up to 200 additional engineers for its technology hubs located in Barcelona, Madrid, and Warsaw, Poland, to enhance the underlying technology.

A Landmark Funding Round for Spain

This funding round represents a significant achievement, not only for Glovo but also for Spain’s startup ecosystem. It constitutes the largest-ever funding round secured by a Spanish startup to date.

Strategic Lean Operations

“We began in Spain, a country where access to capital is often more limited compared to others in Europe,” explained Sacha Michaud, the company’s co-founder. “We achieve more with fewer resources, which has fostered a more efficient operational model.” He further stated, “We have developed our own unique strategy, and it appears to be yielding positive results.”

Investment Details

Lugard Road Capital and Luxor Capital Group, with the latter being an affiliate of the former, spearheaded the funding round. Existing investors, including Delivery Hero, Drake Enterprises, and GP Bullhound, also participated.

Future Growth and Innovation

Oscar Pierre, Glovo’s other co-founder and CEO, expressed enthusiasm about the continued support from Luxor Capital Group and existing investors. He stated, “Over recent months, we have progressed rapidly, yet our core vision remains unchanged.”

“This investment will enable us to strengthen our position in key markets, accelerate our leadership in areas where we already excel, and further develop our Q-Commerce division. We will also introduce new innovations to our diverse multi-category offering, providing customers with greater choice.”

Valuation and Market Context

While the specific valuation remains undisclosed, Glovo was valued at $1.18 billion in December 2019, prior to the COVID-19 pandemic, during its $166 million Series E funding round, according to PitchBook data. Michaud confirmed that the current round represents an “up-round,” suggesting a valuation of at least $1.7 billion, potentially higher.

This funding arrives during a period of intense investment activity within the delivery sector in Europe. Investors are actively seeking opportunities in the rapidly expanding market for delivering food, groceries, and essential goods.

Competitive Landscape

Recent fundraising activities include:

• Gorillas (Berlin): $290 million at a valuation exceeding $1 billion for its on-demand grocery service.
• Everli (Italy): $100 million (Luxor Capital Group is also an investor).
• Getir (Turkey): $300 million at a $2.6 billion valuation, with Sequoia’s first investment in the European food market.
• Zapp (London): Reportedly secured $100 million in funding.
• Rohlik (Czech Republic): $230 million.

Lessons from Deliveroo’s IPO

Deliveroo’s recent IPO serves as a cautionary example for the sector. While the company, backed by Amazon, raised $2.1 billion in the private placement, its debut on the LSE saw shares decline significantly below the offer price.

Concerns surrounding Deliveroo highlight the importance of sound unit economics, competitive pressures, and labor costs. These factors are crucial for long-term sustainability.

Glovo’s Distinct Approach

“We are charting our own course and achieving considerable success,” Michaud remarked when discussing Deliveroo’s IPO. “We continue to operate as the underdog in this landscape.”

Strategic Focus on Europe

Glovo has streamlined its operations by divesting its Latin American business to Delivery Hero for $272 million. This strategic move allows the company to concentrate solely on Europe and neighboring regions, where it is actively pursuing acquisitions.

Investing in Dark Stores and Fulfillment

In January, Glovo entered into a strategic partnership with Swiss real estate firm Stoneweg, securing €100 million ($117 million) to co-develop “dark stores” in its operating areas. These facilities aim to enhance distribution networks and accelerate delivery times.

These dark stores stock items from partners like Carrefour, Continente, and Kaufland, as well as independent retailers, enabling them to offer B2C delivery services without the substantial investment in their own infrastructure.

Optimizing Delivery Times

Glovo currently promises deliveries in 29 minutes in many markets, and is already achieving average delivery times of 10-15 minutes in several locations. The goal is to standardize this faster delivery speed across all markets.

This requires both operational and technological improvements, driving the company’s expansion of its engineering team and platform development.

Expanding Beyond Restaurant Delivery

While restaurant delivery remains Glovo’s primary business, the company has experienced a surge in demand for other product categories and is expanding its offerings accordingly.

“The COVID-19 pandemic has enabled us to deliver virtually anything within a city,” Michaud stated. “It has educated consumers about the convenience of on-demand delivery. Why would I spend time shopping in person when Glovo can bring anything I need directly to me?” He anticipates that grocery shopping will follow a similar trajectory to restaurant delivery within the next few years.

This outlook is driving the company to expand into new areas, including clothing, fashion, pharmacy, and flowers, positioning itself to meet evolving consumer needs.

Examining Labor Practices

This position inherently involves a key element within this tripartite marketplace. Beyond the restaurants and retailers collaborating with Glovo, and the customers utilizing the app for purchases and deliveries, the couriers responsible for the initial and final stages of transport are crucial.

Currently, these couriers largely operate on a freelance basis, frequently managing work across multiple platforms. The nature of their work, and their associated compensation, has attracted significant attention and scrutiny in both the United States and Europe.

Essentially, companies assert that couriers benefit from substantial earning potential; however, many couriers and advocacy groups contend that the reality differs considerably.

This disparity has manifested in numerous public demonstrations and is now leading to formal legal challenges aimed at securing worker rights. Beyond the ethical considerations, this situation concerns investors due to potential increases in operational costs. For businesses already operating with limited profit margins – or incurring losses – this presents a significant challenge. It is highly probable that these concerns contributed to the difficulties experienced by Deliveroo during its initial public offering.

Similar challenges are also being faced by Glovo. The company experienced a defeat in a Spanish supreme court case last September, where its attempt to classify a courier as self-employed, rather than an employee, was rejected.

Consequently, Spain is now developing formal reforms to establish guidelines and requirements for companies to provide benefits to these workers. The implementation of these reforms will take time, while broader efforts are underway across the European Union to standardize the approach across all member states.

The core of this complex issue lies in Glovo’s advocacy for maintaining the courier’s self-employed status, while simultaneously supporting the provision of benefits by companies utilizing their services, such as Glovo itself. The company desires a unified, Europe-wide approach.

“We believe there is a need for enhanced social rights for workers,” stated Michaud, who leads the company’s public policy initiatives. “We champion a freelance model supplemented by additional social rights provided by companies like Glovo, but existing regulations in many countries do not facilitate this.”

However, Glovo’s position isn’t entirely straightforward, as it does not endorse all aspects of the proposed labor reforms.

“We do not believe that rigid schedules and mandated minimum wages are the optimal solution,” he explained. Glovo argues that the inherent flexibility of the delivery business model would be compromised by a shift towards fixed wages and full-time employment, ultimately proving detrimental to couriers. Ultimately, the company, along with others in the sector, is navigating negotiations, seeking to mitigate expenses while making necessary concessions.

Investors appear prepared to address these issues and their long-term implications, recognizing the potential for significant returns within this rapidly expanding technological landscape.

“Our investment in Glovo demonstrates our dedication to a company and leadership team that consistently innovates and disrupts the on-demand delivery sector,” commented Jonathan Green, founder and portfolio manager at Lugard Road Capital. “As a long-term investor in Glovo, we are enthusiastic about witnessing the company’s continued success in satisfying customers through its distinctive multi-category offerings, capitalizing on the substantial market opportunities in both current and emerging regions.”