Spain's Glovo grabs $166M Series E for its 'deliver anything' app

Natasha Lomas

Spain's Glovo, an on-demand delivery app platform which operates in Europe, LatAm and Africa delivering food but also other urban conveniences from groceries to pharmaceuticals, has bagged another €150 million (~$166M) in a fast-following Series E round led by Abu Dhabi state investment company, Mubadala.

The raise follows a €150M in Series D that was announced in April, and $134M in Series C in mid 2018. The total raised since the business was founded back in 2015 is now around $488M.

The Barcelona-based startup says the latest raise has pushed its valuation past $1BN -- putting it into a very exclusive Spanish unicorn club, with the likes of ride-hailing giant Cabify. (Glovo reckons it's only the second privately held business in the country to achieve such a valuation).

Co-founder Oscar Pierre would not disclose the exact valuation investors are putting on the business now -- beyond publicly acknowledging the unicorn milestone. "We've decided not to disclose valuation," he said. "Even internally, all these valuation things it's not something we care a lot about... Crossing the billion, I guess, is something worth announcing but not more details."

Glovo's new investor, Mubadala, is investing from a $400M fund announced earlier this year for backing European startups -- which is itself backed by Japanese conglomerate, Softbank. Mubadala was also a backer of Softbank's Vision Fund. (And the latter has made some very big bets in the on-demand delivery space, ploughing funding into DoorDash in the US and Rappi in Colombia to name two.)

Asked whether Glovo sees opportunities for expansion in the Gulf region in light of Mubadala joining its investor roster, Pierre said: "It hasn't been part of the thesis of investment -- so we're not linking it."

Glovo's market focus remains fixed on three core regions where it currently operates: South America, South West Europe, and Eastern Europe and Africa -- the strategy having been to target regions where competitors hadn't already established themselves as the go-to on-demand delivery platform.

"Middle East for us it seems already a bit too competitive to go now," he told us. "All our expansion playbook has been focused on going first to markets... [or where our competitors] were a second player. And the online food delivery market in Middle East is very developed already.

"So, never say never, but short answer is we're not planning in the short term to launch there."

Speaking in an on stage interview at TechCrunch Disrupt Berlin last week, Glovo's other co-founder, Sacha Michaud, suggested the hyper competitive on-demand food delivery market is set for more consolidation in the short term. Though he said Glovo's team will be head down "aiming for profitability" -- rather than looking to go shopping for growth by buying rivals (or indeed being bagged themselves).

Pierre also told us the focus for the business in 2020 -- now flush with Series E cash -- will be achieving profitability. He said it's hoping to achieve that in a little over a year's time.

"Our plan is to use this money to go fully profitable as a company during early 2021," he told TechCrunch. "I think that's quite realistic. Still with a very high growth. So we're expecting more than 2x-2.5x growth during next year."

"Today we operate in 26 markets. And many of them are still in early stage, and they're still in investment phase so I think first of all we're going to use this money to take most of our countries to the positive operational profit stage," he went on. "Our model is one where during the first 18 months you need to invest in a city -- because you need to build the right capillarity, the right efficiency to start generating positive profits."

Glovo launched its service in around eight new countries during 2019, per Pierre.

Which means there's plenty of investment that still needs to go in to those markets over the coming year to bring them up to the required density to tilt for profitability.

So it looks likely that it will step off the gas a little on its blistering pace of growth and market expansions next year -- as it puts more effort on deepening its footprint to push for the scale required to tip into positive margins.

Although Pierre also suggested there "might be a few new countries" it will ride into next year -- noting, too, that it will have a larger marketing budget in 2020 vs this year.

"The rate of new cities that we're currently launching is very high. Probably every week we keep launching at least ten cities -- Italy for example has already like 60 cities launched and we think we can go to more than 200 so there's a lot of cities still to penetrate," he said. "We've had very good results in some African or Eastern European countries like Ukraine, Kazakhstan, Georgia. And there's some similar markets that we could go to. [There are also examples] in Africa, like Ivory Coast. It's been a great success."

"We do expect a lot," he added. "2019 on relative terms [growth] was very high. It was like 3.5x. It's very hard to maintain that growth with the current size that we have but it's still going to be very high -- it's probably going to be 2x-2.5x"

A big chunk of Series E funding will be ploughed into expanding Glovo's engineer team -- with a plan to hire around 300 additional developers by mid 2020. This will build on the circa 150 devs it already employs in Barcelona and a new tech hub it's building out in Warsaw.

As a whole the business employs 1,500+ staff at this point -- not including the thousands of self-employed couriers (who it calls 'Glovers') who make the deliveries -- but 2020 will see it significantly grow headcount, with both up to 300 more engineers being added and potentially even more hires related to running the 'dark stores' it's planning to significantly ramp up next year too.

Asked why this on-demand delivery business is so tech intensive Pierre said it's all about eking out small gains to reduce friction and yield incremental savings by automating and optimizing platform and UX interactions which -- cumulatively -- make the difference for this type of thin margins business.

"Overall there's a lot of complexity in what we do. So we deliver anything in your city in 30 minutes. And in this 30 minutes you need to co-ordinate a lot of things. A lot of things have to go well, like the restaurant or the store has to receive well information, they need to receive well the preparation time to get that ready, of course all the logistics and all the routing and the despatching of the orders with the couriers needs to work very well, and then the front end for the user -- it's an industry where there's a lot of competition and we're all developing better and better features. So that also has to work out very well."

"If we had 400 engineers there's many more specialized [product] teams that we would build," he added. "On the other end we are by definition a super high volume, low margin business -- and next year we're talking about doing more than 100M orders, maybe close to 200M orders next year. Which means that you optimize every single order by 20 cents, which seems nothing in a €20 basket, and you're generating €40M extra and a bit there. And most of the efficiencies -- they come through tech."

Groceries will be the other big focus for Glovo in 2020, with Pierre noting the category is its second biggest, after food (i.e. restaurant meal) deliveries.

Since 2018 Glovo has experimented with opening a handful of so-called 'dark stores' in key cities -- such as Madrid and Barcelona. These are delivery-pick-up-only warehouses for convenience store style grocery shopping -- be it toothpaste, snacks or soft drinks -- with stores strategically sited to ensure speedy delivery across a city.

It has around seven cities with dark stores operational now, according to Pierre. The plan is to launch over 100 more of these 'Super Glovos' (as it calls them) in 2020 -- focusing on larger cities.

"We are building our own dark stores and it's a model that we like a lot," he told us. "We think it works everywhere. So far we have basically been rolling it out in our biggest cities. And we're going to keep with that focus.

"What we're very focused on now is making sure that the biggest cities, we have enough capillarity of dark stores to guarantee super fast delivery time. And for us super fast delivery time means 15 minutes. So that's what we're focusing on... Before launching more cities we're very focused on how do we guarantee this 15 minute delivery time."

As noted above, ramping up on groceries will also add headcount to the business. Pierre confirmed the stores are staffed by employees -- and said between four to five people are needed per store to work as packers and store managers. So that's potentially another 500 staff Glovo will be adding to its books next year.

It also partners with supermarket giant Carrefour to offer full supermarket shopping on-demand via the app in select markets. But it sees dark stores as supplementary to that partnership model -- playing to the push-button convenience its business encourages.

And -- again with an eye on profitability -- providing opportunities for cross selling to bulk up order size.

The dark store play piggybacks on convenience, using the fixed delivery fee as a lever to encourage users to add a few more staple items to an urgent shopping need, because, well, they might feel bad if they shell out to just get a bottle of mixer brought to their door. (Super Glovos stock a limited range of items (<1,000 SKUs) to help keep delivery times down.)

"There's a lot of people that order because they need something very urgently -- like for tonight, and since they're ordering maybe four or five items I think we do a pretty good job at cross-selling and adding more," said Pierre. "So it's pretty basic things but that people need... tonight, tomorrow and maybe the day after that. They don't do the big basket.

"In Super Glovo you can find things like oranges, potatoes, bananas. We have started selling some meat in some markets -- like simple burgers. Actually we tested selling Impossible Burgers in Barcelona. But most of it is not perishable -- like 90%."

"We believe that the best for the user is to have both," he added, discussing dark stores vs supermarket partnerships. "To have a very fast, 15 minute, more like convenience option and also offer them maybe one or two great retailers, like Carrefour -- maybe for larger baskets or for their unique brands. I think that's the best user experience possible."

Beyond food, courier services will be another area of product focus for Glovo in 2020, per Pierre.

"Surprisingly enough there's a lot of people that use us for courier," he said." Like I forgot my keys or just send some documents from point A to point B. This is a service where we want to improve our product a lot because it does take a lot of orders."

But that's just about going to be the limit. He suggested Glovo will have limited resources to fully implement some of the other stuff it's experimenting with (or has plans to) -- as it works towards its overarching vision of becoming an 'everything app' for urbanities. Because thin margins like plentiful orders.

For example, he said it's currently testing its own brand on-demand scooters in Argentina.

"Our users in Buenos Aires there's 500 scooters -- yellow painted Glovo scooters in the streets -- and they can use them with the same Glovo account. It's a test for us to learn about a new industry and stuff."

"Here in Barcelona we are looking at the possibility to sell ticketing -- like last minute tickets for cinema, for theatres, for football matches," he added. "And of course sell digital tickets not printed tickets. So we like everything that gets the user closer to their city and makes it basically easier. And we're going to be testing things but I think not rolling out, scaling massively.

"We have a mentality of testing things. But we don't think we're going to have resources during 2020 to do a full rollout."

Asked what he sees as the end game for Glovo if, as he hopes, it achieves profitability in 2021 -- whether it's an IPO or exit via acquisition -- Pierre said the team is focused on staying independent, however that can be achieved.

"We're very focused on that point where we can basically decide our future. More or less investor independent. I think we can reach that," he suggested. "And then decide what we want to do. Glovo's one of these projects that it's so fun and there's so much entrepreneurship in terms of launching new services and verticals. The reality is that's, for us, very important -- and we don't see ourselves doing anything else.

"So I think our dream would be stay as independent. Maybe IPO. It's a tool for us to give liquidation to all our shareholders and employees. But it's not a goal per se. We have 18 months to be profitable, depend on us, and keep having a very big impact."