Forget food delivery. Just the organic slice of the grocery delivery business remains competitive in the U.S. with giants from the brick and mortar world, tech titans and upstarts all muscling in for a piece of an annual market that sees more than $40 billion in sales domestically.
Some have flamed out, like Farmigo, which recently closed shop. And others done some belt-tightening, like Good Eggs.
Now, a relatively young player called GrubMarket has raised $20 million in a Series B round of funding to pull ahead of the pack. The company employs about 25 full-time today in San Francisco with another 20 employees in Los Angeles, where the company expanded its service earlier this year.
Chief executive Mike Xu said GrubMarket is, “A marketplace that connects farmers and food producers directly with consumers, with no middle man.”
The CEO said his company aims to make nutritious mostly organic foods from small producers accessible to customers who would want it but don’t like to, don’t live near or simply can’t afford to shop at farmer’s markets and other specialty groceries that have traditionally sold it.
GrubMarket gives farms marketing and other online tools to increase their sales and revenue, connects them to shoppers, then charges the farms a small commission on sales, which it applies toward the cost of deliveries.
Investors in GrubMarket’s new round included Ashton Kutcher’s Sound Ventures, Global Founders Capital, Riverhead Capital, GGV Capital, Fosun Group, Danhua Capital and individual investors Fabrice Grinda and Gang Wang.
Sound Ventures’ Abe Burns said: “Using data to create logistics coordination and efficiency has not seen before in this market. What’s wholly disruptive about the company is not the rudimentary technology, but the way it’s applied.”
Among GrubMarket’s offerings are crates of meats, seafood and produce that it ships either locally around San Francisco and Los Angeles, or in some instances, nationally. The boxes are something like a “CSA” or community supported agriculture box.
The startup also offers deliveries to restaurants and offices that want to buy in larger quantities. That’s part of what is helping it drive growth in an industry with traditionally low margins and high operating costs.
Xu said, “We’re really conservative and make sure our unit economics make sense in each market before we expand geographically.” The company plans to use the capital to invest in marketing and winning over new customers while regionally expanding, near-term.
It will also continue to invest in the proprietary software it uses to run its operations from packaging foods in assembly lines in a fast way without generating food waste, to helping the 600 vendors it works with to sell everything they can to shoppers nearby, Xu said.
Investors and the CEO declined to comment on terms of the deal including a valuation.