WSJ News Exclusive | Gopuff Tries to Raise Money Again

Gopuff had planned to go public this year but put off listing as the market slid and tech stocks took a beating. Last year, investor excitement about the future of fast delivery helped Gopuff raise more than $2 billion, more than tripling its valuation in less than a year to $15 billion by mid-2021.

The reversal of pandemic trends and a prolonged stock-market selloff have slowed the pace of fundraising and pushed startups to recalibrate and cut costs.

The nascent fast-delivery sector—companies that strive to get products to customers in under 30 minutes—has been hit particularly hard. Some Gopuff rivals folded or were bought in recent months.

Delivery company

DoorDash Inc.’s

stock has fallen close to 60% this year, far exceeding the tech-heavy Nasdaq Composite Index’s slide of less than 25%.

Private startups have trimmed their valuation too. Payments giant Stripe Inc. cut the internal value of its shares by 28% last month. Instacart Inc. cut its valuation by nearly 40% in March.

One Gopuff investor, Fidelity Investments Inc., has marked it down, cutting the value of its stake by nearly 50% as of June.

People familiar with Gopuff’s spending said the company had about $1.5 billion in cash after burning about $400 million in the first three months of this year. They said its plans to raise a new line of credit show that it is trying to shore up its finances ahead of a potential economic downturn.

Daniel Folkman,

Gopuff’s senior vice president of business, said the company has reduced its cash burn since the first quarter by shedding staff and closing dozens of warehouses. He said spending last year and in the first three months of the year was high because of investments to expand the business.

The company’s margins are improving and it has enough cash to cover it for a further four years, Mr. Folkman said. “We continue to respond to market dynamics,” he said, adding “we are operating from a position of strength.”

While startups sometimes arrange revolver loans in the run up to an IPO because they can get good terms from banks seeking to build a relationship, at times borrowings can point to other problems, said

Brittain Ladd,

a supply-chain consultant who has advised grocery retailers and food-delivery companies.

It is a sign that “operations alone aren’t generating enough cash to sustain the business,” he said.

Founded in 2013 by two college students, the Philadelphia-based company expanded across the U.S. fueled by venture-capital money, and got a boost as Covid-19 left people sheltering indoors. The company sold speed and convenience, employing drivers and storing inventory in warehouses so snacks and household essentials could reach consumers within 30 minutes.

But delivering small orders, and fast, is expensive. Older delivery startups such as DoorDash and

Uber Technologies Inc.’s

Eats continue to lose money despite not employing drivers.

Order growth has cooled at Gopuff, with orders between Jan. 1 and Aug. 15 up 45% from a year earlier, compared with a 75% pace in the same period last year.

In July, Gopuff cut 10% of staff and said it planned to shut 76 of its warehouses, covering roughly 12% of its network. That followed a 3% staff cut in March.

In a staff memo, Gopuff’s co-founders wrote that the latest cuts aim to shift to profitable growth and adjust the business amid concerns the economy is slowing.

Gopuff said it is hiring new people to lead this transition. It recently appointed a former Panera Bread executive as chief financial officer. The company’s former CFO stepped down earlier this month, following the departures of two former

Amazon Inc.

executives who had joined as senior vice presidents less than two years ago.

Write to Preetika Rana at [email protected] and Corrie Driebusch at [email protected]