Coronavirus stay-home orders have sparked an unprecedented demand for grocery delivery around the world. Now investors are clamoring to bet on promising players in the field.
That includes DST Global, the investment firm helmed by Israeli-Russian billionaire Yuri Milner. Most recently, it poured $35 million into Weee!, a California-based startup that from its own warehouses delivers to major cities across the U.S. Asian groceries like fresh kimchi and Japanese desserts. The Series C round boosted the five-year-old startup’s total raise since launch to more than $100 million.
Weee! declined to share its post-money valuation, but the figure likely surpassed $500 million as industry sources told TechCrunch that DST Global does not generally back companies whose valuation is less than $500 million.
Online grocery is a capital-intensive business with thin profit margins, so it’s unsurprising to see many contenders — in both China and the U.S. — operating in the red. Against the odds, Weee! turned profitable earlier this year and went cash-flow positive.
That means the startup was in no rush to fundraise, probably giving it more bargaining power in negotiating terms with a storied investor like DST Global, whose portfolio spans Spotify, Twitter, Airbnb, Slack, Didi and Gojek, just to name a few.
Weee! certainly matches DST Global’s investment target as a high-growth startup. In June, the company recorded 700% year-over-year growth in revenue and was on course to generate revenue in the lower hundreds of millions of dollars in 2020, it told TechCrunch at the time.
Since the U.S. began winding down lockdowns and people returned to supermarkets, some grocery delivery services have seen their revenue growth slow. Weee!, however, is currently growing 15-20% more than its March peak. CEO Larry Liu explained the sustained boom stems from the service’s product differentiation: Asian specialties that one can’t even find in Chinatowns.
“People don’t want to pay extra if [an online grocery] only provides convenient delivery but no product differentiation,” said Han Shen, founding partner of iFly.vc, a California-based fund that backed Weee! in its Series A round.
In addition, Weee! tries to streamline every step of its operations, from product procurement, warehouse management, staff allocation, through to door-to-door delivery. The result is zero food waste thanks to fast inventory turnover.
“There is no secret tactic that we can’t talk about, nothing more than achieving efficiency throughout the entire process,” Shen observed.
In the meantime, Weee! works to keep prices down by cultivating direct relationships with suppliers like local farms and opting for next-day delivery rather than the more costly 30-minute standard expected in China, where he grew up. Earlier this year, former chief operations officer of Netflix Tom Dillon joined the board to help beef up Weee!’s operational efficiency.
With the new proceeds, the Asian e-grocer hopes to hire new talents and expand its delivery service from eight key regions to 13-14 cities across the U.S. by the end of this year.
Updated the story with comments from DST Global.
Updated the story again to remove comments from DST Global which the firm confirmed were inaccurate.