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Rappi, an on-demand delivery startup operating in Latin America, this week laid off hundreds of employees, Axios has learned.
Why it matters: On-demand delivery of meals and other products is coming under increased financial pressure, as no one has managed to make the model profitable.
By the numbers: Rappi told a Brazilian media outlet that it's laying off around 6% of its workforce, which would come out to over 300 people.
- Rappi has raised nearly $1.5 billion in venture capital funding, most recently at a $3.5 billion post-money valuation in a SoftBank-led deal. Other investors include Andreessen Horowitz and Sequoia Capital.
- The startup is one of several SoftBank-backed companies to endure layoffs recently, including pizza-making robot company Zume.
What they're saying:
"In 2020 we have decided to double down on our technology team and to focus on our user experience. In order to achieve this vision, we made the decision to reduce some areas and increase the size of others to achieve our goal for the present year and deliver an even better experience for our users. In total, the number of people who were impacted by the decision across [Latin America] was about 6% of the people in the company. This decision is not a reflection of our growth plans, and we are in fact actively hiring a large number of people in our areas of focus for 2020."— a Rappi spokesperson
The big picture: On-demand delivery companies, including DoorDash, Postmates and Uber Eats, have become notorious cash-burners, using venture capital to subsidize their losses.
- GrubHub has generated past profits, but most of that was as an enabling platform through which restaurants themselves provide the meal deliveries. The Chicago-based company is begrudgingly switching to a newer model because of competitive pressures and is reportedly seeking a buyer.
Bogota-based Rappi operates in nine Latin American countries, including Colombia, Brazil, Mexico, Peru and Argentina.