Food Rocket eyes next fundraise
Food Rocket, the rapid grocery delivery startup, is already eyeing its next funding round as it prepares to expand into other areas of the fresh food market, CEO Vitaly Alexandrov tells Axios.
Catch up fast: Food Rocket closed a $25 million Series A, led by Alimentation Couche-Tard through its Circle K Venture Fund, in April.
Driving the news: The next funding round will be larger than the Series A, says Alexandrov, declining to disclose size details.
- Food Rocket expects to tap US venture capital funds and family offices focused on food retail and delivery.
- The next round is expected to close sometime by the end of the year, he says.
Context: In tandem with Circle K's investment, Food Rocket also entered into a partnership with the grocery and convenience chain, which has more than 14,000 Circle K and Couche-Tard locations in 26 countries and territories.
- The collaboration gave Food Rocket access to Circle K’s supply chain and purchase prices, yielding higher gross margins while decreasing costs, Alexandrov says.
- Traditionally, ultra-fast grocery delivery services have had to rely on achieving extraordinarily high order volumes to eke out decent margins.
What’s next: The company also plans to roll out five hot meal kitchens, one of which is currently being piloted at one location, to the rest of its six Chicago locations by the end of the summer, Alexandrov says.
- Food Rocket will start delivering hot coffee within 15 to 20 minutes, he says, and then extend to sandwich and pizza delivery, among other categories.
Yes, but: A handful of Food Rocket's competitors have had it tough. Similar on-demand delivery startups have cut hundreds of staff or frozen hiring over the past few months.
- Last week, Gopuff said it planned to lay off 10% of its global workforce, or about 1,500 employees, and close dozens of its so-called dark stores.
- Delivery app Getir had plans to ax 14% of its global workforce in May.
What they’re saying: Alexandrov is banking on Food Rocket's lean business model, and notes that he's avoided adding staff and expanding too quickly.
- “We’re super conservative in terms of how we spend our money,” he says.
- Food Rocket only has a handful of stores to achieve as much efficiency and profitability as possible before it scales up, he adds.
- Plus, Food Rocket’s delivery workers are full-time employees, and not contractors like some of its rivals.
The bottom line: “We think that our main competitor is the habits of our customers,” who are still making trips to the corner store, grocer, and Whole Foods for meals and fresh items, Alexandrov says.
- “We want to replace your regular daily shopping.”